1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report In recent years, the mismatch between the duration of banks' assets and liabilities has intensified, with the duration of the asset side lengthening and that of the liability side shortening. This has put pressure on some liquidity indicators and constrained banks' asset allocation behavior. The increase in long - term bond holdings has also increased the pressure on interest rate risk indicators. The report analyzes the current indicator constraints on banks' bond allocation and the prospects of these indicator pressures [1]. 3. Summary by Related Catalogs 3.1 Liability - side Duration Reduction and Asset - side Duration Extension - **Net Interest Margin Pressure**: Since 2022, the net interest margin of commercial banks has continued to decline, from 2.08% at the end of December 2021 to 1.42% at the end of June 2025, compressing banks' profit margins [9]. - **Liability - side Duration Reduction**: - **Deposit**: Since 2023, the duration of new deposits has significantly shortened. High - cost, long - term deposits have been significantly reduced due to the expiration of high - interest fixed deposits in 2025 - 2026 and the suspension of "manual interest compensation" in 2024. Banks tend to guide customers to transfer to short - term deposits, and customers are less attracted to long - term deposits. New deposits are concentrated within 1 year [10]. - **Inter - bank Liabilities**: In 2025, banks mostly reduced the issuance of 9M and 1Y certificates of deposit (CDs) and increased the issuance of 3M and 6M CDs [15]. - **Asset - side Duration Extension**: Since 2019, the loan growth rate of listed banks has continued to decline, and financial investment has become an important alternative asset on the asset side. Bond investment is a major part of financial investment, with government bonds accounting for a relatively high proportion. From 2023 - 2025, the average duration of local government bonds has lengthened from 12.39 years to 15.62 years, and it is expected that the duration of the asset side of national and joint - stock banks will lengthen [17]. 3.2 What Indicator Constraints Do Banks Face in Bond Allocation? 3.2.1 Liquidity Risk: Low NSFR Index for Joint - stock Banks - **Liquidity Regulatory Indicators**: Chinese banks need to meet five liquidity regulatory indicators, including LMR, LR, NSFR, LCR, and HQLAAR. The report mainly analyzes LR, NSFR, and LCR. In mid - 2025, the LR and LCR of listed banks generally had sufficient safety margins, while the NSFR safety cushions of joint - stock banks (except China Merchants Bank) and some city commercial banks were relatively thin [3][22]. - **Reasons for Low NSFR in Joint - stock Banks**: The core reason lies in the liability side. Retail deposits are not advantageous, the proportion of inter - bank liabilities is high, and deposits tend to be short - term. This leads to a low Available Stable Funds (ASF) [41]. - **Measures to Deal with NSFR Pressure**: - **Increase the Numerator**: In October, joint - stock banks significantly increased the issuance of 1Y CDs. The net financing of joint - stock bank CDs in October reached 62.44 billion yuan, and the issuance scale of 1Y CDs was significantly increased [45]. - **Reduce the Denominator**: From January to September this year, joint - stock banks basically maintained a monthly net reduction of CDs and increased the allocation of interest - rate bonds, which is conducive to reducing the Required Stable Funds (RSF) and improving the NSFR [48]. 3.2.2 Interest Rate Risk: The ΔEVE/First - tier Capital of Some State - owned Banks Approaches the Upper Limit - **Regulatory Requirements**: According to the "Administrative Measures for the Interest Rate Risk of Commercial Banks' Banking Books (Revised)", when the economic value change of state - owned large commercial banks exceeds 15% of their first - tier capital, the banking regulatory authority should pay attention and conduct follow - up evaluations [53]. - **Interest Rate Risk of Banking Books**: In 2024, under six standardized interest rate shock scenarios, the maximum economic value change losses of Agricultural Bank of China (- 14.31%), Industrial and Commercial Bank of China (- 14.71%), and China Construction Bank (- 14.73%) as a percentage of their first - tier capital were close to - 15%. This has objectively constrained bond - allocation behavior and will affect the volume and duration of state - owned banks' bond investments [55].