1. Report Industry Investment Rating No information provided in the report. 2. Core Viewpoints of the Report - Bank secondary bonds may see a significant issuance volume in Q2 2026, potentially exceeding historical levels. The investment strategy should focus on "configuring for coupon income and trading from short - to long - term bonds" [1][3][40]. - The issuance of bank Tier 2 and perpetual bonds is subject to a "dual - approval" regulatory framework. The People's Bank of China focuses on "balance management", while the National Financial Regulatory Administration implements "hierarchical jurisdiction" and "quota validity period" management [3][15]. - In 2026, the supply of bank sub - debt is expected to remain stable with a slight increase. The net issuance of bank Tier 2 and perpetual bonds is estimated to be around 400 billion yuan, and the total issuance of 10 - year Tier 2 bonds, 15 - year Tier 2 bonds, perpetual bonds, and TLAC bonds is about 2 trillion yuan [3][33][34]. - The Q2 2026 issuance of bank sub - debt is predicted to be around 90 billion yuan, with a range of 700 - 1100 billion yuan, showing a significant increase compared to 2024 - 2025 [3][39][40]. 3. Summary by Directory 3.1 Commercial Banks' Regulatory Collaborative Framework for Capital Instrument Issuance: The "Dual - Approval" System of the People's Bank of China and the Financial Regulatory Administration - Commercial banks issuing Tier 2 capital bonds and perpetual bonds must obtain administrative approvals from both the People's Bank of China and the National Financial Regulatory Administration. The People's Bank of China focuses on "balance management", setting annual balance limits and the validity period usually ends at the end of the year. The Financial Regulatory Administration implements "hierarchical jurisdiction" and "quota validity period" management, with different approval authorities for different types of banks and a 24 - month approval validity period [15]. 3.2 Dynamic Laws of New Approvals, Outstanding Amounts, and Actual Issuance of Tier 2 and Perpetual Bonds - **Seasonal Characteristics of Issuance and Regulatory Approval Rhythms**: In recent years, the approval of Tier 2 and perpetual bonds has shown a phased and concentrated release, with obvious seasonality. The approval peaks are mainly in Q2 and Q4, especially for state - owned large - scale banks. Small and medium - sized banks have a more balanced approval rhythm [17]. - **Interval from "Approval" to "First Issuance": Fast for Large Banks, Slow for Small and Medium - sized Banks**: The interval from approval to first issuance shows a pattern of "fast for large banks, slow for small and medium - sized banks". State - owned large - scale banks and joint - stock banks usually have an average interval of 20 - 40 days, while city and rural commercial banks have an average interval of more than 40 days. In recent years, the issuance conversion efficiency of joint - stock banks, city commercial banks, and rural commercial banks has improved [21]. - **First - Issuance Amount after Approval: Large Banks Issue in Batches, Small and Medium - sized Banks Issue Concentratedly**: Large banks, such as state - owned large - scale banks and joint - stock banks, tend to use the approved quotas in batches according to market conditions. Small and medium - sized banks, like city and rural commercial banks, prefer to issue a large amount in the first issuance after approval. However, the overall average issuance rhythm of all types of banks is relatively fast, and most of the approved quotas are issued within one year [27][28][31]. 3.3 Deduction of the Supply Rhythm of Bank Sub - debt in 2026 - **Supply Forecast of Bank Sub - debt in 2026: Slightly Increased Net Issuance, Stable Total Issuance**: In 2026, the supply of bank sub - debt is expected to remain stable. It is estimated that the net issuance of bank Tier 2 and perpetual bonds is about 400 billion yuan, and the rest of the capital needs will be met by issuing TLAC bonds. The total issuance of 10 - year Tier 2 bonds, 15 - year Tier 2 bonds, perpetual bonds, and TLAC bonds is about 2 trillion yuan, slightly higher than that in 2024 - 2025 [33][34]. - **Will the Supply Shock of Tier 2 and Perpetual Bonds in Q2 Be Strong? The Increment May Be Significant**: As of March 2026, the total approved but unissued amount of Tier 2 and perpetual bonds in the market is about 1.62 trillion yuan. The potential supply mainly depends on the conversion rhythm of state - owned large - scale banks' approved but unissued amounts. The estimated issuance amount of bank sub - debt in Q2 2026 is about 90 billion yuan, with a range of 700 - 1100 billion yuan, showing a significant increase compared to 2024 - 2025 [37][39][40]. 3.4 Investment Strategy: Focus on Configuring for Coupon Income, Trade from Short - to Long - term Bonds - In the context of a possible concentrated release of supply in Q2, rising economic inflation expectations, and the presence of allocation power from fixed - income plus funds and wealth management products, the investment in bank Tier 2 and perpetual bonds should focus on "configuring for coupon income and trading from short - to long - term bonds". - The allocation portfolio should mainly focus on medium - and short - term durations, moderately taking risks such as rating downgrades and insufficient liquidity at curve singularities. The bottom - position should focus on 1 - 3 - year bonds and can gradually expand to about 4 - year bonds. Credit downgrades can focus on small and medium - sized banks with an implied rating of AA - or above, and pay attention to valuation repair opportunities brought by mergers and acquisitions or special bond injections. Regions such as Jiangsu and Zhejiang are preferred. - Take advantage of the price adjustment window caused by the supply shock in Q2 for allocation. Slightly focus on Tier 2 capital bonds with better liquidity, and consider trading from short - to long - term durations to play the convexity point. However, be aware of the fluctuations of these bonds during quarter - end, redemptions of fixed - income plus funds, and supply shocks, and consider fast - in - and - fast - out trading strategies or neutral hedging protection [40][41].