Report Information - Report Title: "Fixed Income Weekly: Have Large Banks Started Buying Long-Term Bonds? - Weekly Report on Bond Market Institutional Behavior (Week 1 of August)" [1] - Report Date: August 10, 2025 [2] - Chief Analyst: Yan Ziqi [3] - Analyst: Hong Ziyan [3] 1. Report Industry Investment Rating No industry investment rating information is provided in the report. 2. Report Core View - The bond market ran smoothly this week, with the 10-year Treasury yield slightly dropping to 1.69%, the funding rate staying around 1.42%, and the 5-year AAA medium - short note yield dropping to 1.91% [3][11] - Large banks continued to buy short - term bonds, and although they bought some long - term bonds, the volume was less than 10 billion yuan, so it's hard to say they have started buying long - term bonds. However, they have bought long - term local government bonds in multiple weeks since June, which may be related to duration balance and return requirements [3][4][12] - Funds further increased their purchases of credit bonds and Tier 2 capital bonds. With the easing of the funding situation, the bond market leverage ratio climbed, and there is still an opportunity for credit spreads to compress [4][13] 3. Summary by Directory 3.1 This Week's Institutional Behavior Review - **Yield Curve**: Treasury yields declined overall, with the 1Y yield down 2bp, 3Y down 3bp, 5Y down about 3bp, 7Y down 1bp, 10Y down 2bp, 15Y flat, and 30Y up 1bp. For CDB bonds, short - term yields declined and long - term yields increased, with the 1Y yield changing less than 1bp, 3Y down 1bp, 5Y down 1bp, 7Y changing less than 1bp, 10Y up 2bp, 15Y up 2bp, and 30Y up 1bp [14] - **Term Spread**: Treasury interest spreads rose, and the spreads widened overall; CDB bond interest spreads were stable, and the middle - term spreads widened [15][16][17] 3.2 Bond Market Leverage and Funding Situation - **Leverage Ratio**: It dropped to 107.51%. From August 4th to August 8th, it first decreased and then increased during the week. As of August 8th, it was about 107.51%, down 0.07 pct from last Friday and up 0.24 pct from Monday [21] - **Average Daily Turnover of Pledged Repurchase**: The average daily turnover of pledged repurchase this week was 8.1 trillion yuan, with the average daily overnight proportion at 89.87%. The average overnight turnover was 7.3 trillion yuan, up 1.53 trillion yuan month - on - month, and the overnight trading proportion was up 3.10 pct [27][28] - **Funding Situation**: Bank lending showed a fluctuating upward trend. As of August 8th, large and policy banks' net lending was 5.22 trillion yuan; joint - stock and urban/rural commercial banks' average daily net borrowing was 0.57 trillion yuan, and the net borrowing on August 8th was 0.74 trillion yuan. The net lending of the banking system was 4.47 trillion yuan. DR007 fluctuated upward, and R007 fluctuated downward [31] 3.3 Duration of Medium - and Long - Term Bond Funds - **Median Duration**: The median duration of medium - and long - term bond funds decreased to 2.81 years (de - leveraged) and 3.12 years (leveraged). On August 8th, the de - leveraged median duration was 2.81 years, down 0.02 years from last Friday; the leveraged median duration was 3.12 years, down 0.06 years from last Friday [45] - **Duration by Bond Fund Type**: The median duration (leveraged) of interest - rate bond funds decreased to 3.92 years, up 0.04 years from last Friday; the median duration (leveraged) of credit bond funds decreased to 2.89 years, down 0.07 years from last Friday. The de - leveraged median duration of interest - rate bond funds was 3.44 years, down 0.03 years from last Friday; the de - leveraged median duration of credit bond funds was 2.65 years, down 0.04 years from last Friday [48] 3.4 Category Strategy Comparison - **Sino - US Yield Spread**: It generally narrowed, with the 1Y narrowing by 8bp, 2Y by 10bp, 3Y by 6bp, 5Y by 9bp, 7Y by 7bp, 10Y by 6bp, and 30Y by 3bp [54] - **Implied Tax Rate**: It generally widened. As of August 8th, the CDB - Treasury spread widened by 2bp for 1Y, 2bp for 3Y, 1bp for 5Y, about 1bp for 7Y, 3bp for 10Y, about 2bp for 15Y, and less than 1bp for 30Y [55] 3.5 Bond Lending Balance Changes - On August 8th, the lending concentration of the active 10 - year Treasury bond increased, while the lending concentration trends of the second - active 10 - year Treasury bond, active 10 - year CDB bond, second - active 10 - year CDB bond, and active 30 - year Treasury bond declined. All institutions showed a decline [59]

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The bond market has been in a sideways trend for three months. After the equal - tariff disturbance in early April, the yield of the 10 - year Treasury bond dropped to 1.65% and has since fluctuated between 1.65% and 1.70% [2][10]. - There are four changes in institutional behavior during the sideways period of the bond market, including changes in the behavior of large banks, the actions of funds and other asset management products, the allocation preferences of insurance institutions, and the change in the lending volume of 10 - year Treasury bonds [2][3][10]. 3. Summary According to the Directory 3.1 This Week's Institutional Behavior Review - **Four Changes in Institutional Behavior during the Sideways Period of the Bond Market** - Large banks not only increase their purchases of short - term Treasury bonds but also their demand for certificates of deposit. Their weekly demand for certificates of deposit has rebounded to over 100 billion yuan since late May, indicating improved liability - side pressure. After the mid - month tax period disturbance, the liquidity may further loosen [2][10]. - Funds extend the duration of their bond holdings, and asset management products such as trusts increase their purchases. The median duration of interest - rate bond funds has risen to 3.92 years, about 1 year higher than at the beginning of the sideways period, suggesting that non - bank institutions are holding bonds in anticipation of price increases [3][10]. - Insurance institutions have almost stopped buying Treasury bonds in the secondary market and mainly allocate local government bonds, especially 30 - year and 20 - year ones [3][11]. - The lending volume of 10 - year Treasury bonds has significantly declined, while the lending volume of 10 - year China Development Bank bonds has remained flat. The decrease in Treasury bond borrowing by securities firms may be due to limited space for reverse arbitrage strategies in the futures market [3][11]. - **Yield Curve**: The yields of Treasury bonds and China Development Bank bonds have generally declined. For Treasury bonds, the 1Y yield dropped 2bp, the 3Y about 2bp, etc. For China Development Bank bonds, the 1Y yield dropped about 1bp, the 5Y about 2bp, etc [12]. - **Term Spread**: The spread between Treasury bonds and China Development Bank bonds has increased. For Treasury bonds, the term spread has generally widened; for China Development Bank bonds, the medium - and long - term spreads have widened [15][16]. 3.2 Bond Market Leverage and Liquidity - **Leverage Ratio**: It has dropped to 107.09%. From July 14 to July 18, 2025, the leverage ratio first increased and then decreased during the week [19]. - **Pledged Repurchase**: The average daily trading volume of pledged repurchase this week was 7.2 trillion yuan, with an average daily overnight trading volume accounting for 88.54%. The average daily trading volume decreased by 0.97 trillion yuan compared with last week [25]. - **Liquidity**: Banks' net lending has fluctuated upwards. As of July 18, the net lending of large banks and policy banks was 4.18 trillion yuan; the average daily net lending of joint - stock banks and city and rural commercial banks was 0.77 trillion yuan, and they had a net borrowing of 0.75 trillion yuan on July 18 [29]. 3.3 Duration of Medium - and Long - Term Bond Funds - **Median Duration**: The median duration of medium - and long - term bond funds remained at 2.87 years (de - leveraged) and 3.22 years (leveraged). On July 18, the de - leveraged median duration was the same as last Friday, while the leveraged median duration increased by 0.01 year [42]. - **Duration of Interest - Rate Bond Funds**: The median duration of interest - rate bond funds (leveraged) remained at 3.92 years, and the median duration of credit - bond funds (leveraged) rose to 2.99 years, an increase of 0.01 year compared with last Friday [46]. 3.4 Comparison of Category Strategies - **Sino - US Yield Spread**: It has generally narrowed. The 1Y spread narrowed by 5bp, the 2Y by 7bp, etc [52]. - **Implied Tax Rate**: The short - term implied tax rate has widened, while the medium - and long - term rates have shown differentiation [53]. 3.5 Changes in Bond Lending Balance On July 18, the lending concentration of the active bonds of 10 - year Treasury bonds, 10 - year China Development Bank bonds, and 30 - year Treasury bonds showed an upward trend, while that of the second - active bonds of 10 - year Treasury bonds and 10 - year China Development Bank bonds showed a downward trend. Except for securities firms, the lending concentration of all other institutions increased [54].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - Short - term liquidity depends on central bank's injections. Investors can maintain duration and seize opportunities from falling interest rates [2]. - In mid - July, there are both positive and negative factors for the liquidity. The key variable is the central bank's roll - over of outright reverse repos. DR007 is likely to fluctuate between 1.40% - 1.50%. There are few negative factors for the bond market. If there is a tightening trend in liquidity, a further decline in large banks' lending volume should be observed first [3]. 3. Summary According to Related Catalogs 3.1 This Week's Institutional Behavior Review: Is There a Tightening Trend in Liquidity? - **Yield Curve**: Yields of treasury bonds and China Development Bank bonds generally increased. For treasury bonds, 1Y yield rose 3bp, 3Y and 5Y rose 4bp, 7Y rose 3bp, 10Y rose about 3bp, 15Y and 30Y rose 2bp. For China Development Bank bonds, 1Y yield rose about 4bp, 3Y rose 4bp, 5Y rose about 6bp, 7Y and 10Y rose 3bp, 15Y rose 2bp, and 30Y changed less than 1bp [13]. - **Term Spread**: The spread between treasury bonds and China Development Bank bonds increased. For treasury bonds, the short - term spread narrowed and the long - term spread widened. For China Development Bank bonds, the short - term spread was divided, and the medium - and long - term spread narrowed [16]. 3.2 Bond Market Leverage and Liquidity - **Leverage Ratio**: It dropped to 107.3%. From July 7th to July 11th, 2025, the leverage ratio decreased continuously during the week. As of July 11th, it was about 107.3%, down 0.69pct from last Friday and 0.58pct from this Monday [20]. - **Average Daily Turnover of Pledged Repurchase**: The average daily turnover of pledged repurchase this week was 8.2 trillion yuan, with an average overnight proportion of 89.57%. From July 7th to July 11th, the average daily turnover was 8.2 trillion yuan, up 0.61 trillion yuan from last week. The average overnight turnover was 7.4 trillion yuan, up 0.55 trillion yuan month - on - month, and the average overnight proportion was 89.57%, down 0.14pct month - on - month [26][27]. - **Liquidity**: Banks' lending volume continued to decline. From July 7th to July 11th, the lending volume of the banking system decreased. On July 11th, large banks and policy banks' net lending was 4.65 trillion yuan; joint - stock banks and urban and rural commercial banks' average daily net lending was 0.66 trillion yuan, and on July 11th, they had a net inflow of 0.91 trillion yuan. The banking system's net lending was 3.74 trillion yuan [31]. 3.3 Duration of Medium - and Long - Term Bond Funds - **Median Duration**: It dropped to 2.87 years. From July 7th to July 11th, the median duration of medium - and long - term bond funds was 2.87 years (de - leveraged) and 3.21 years (leveraged). On July 11th, the median duration (de - leveraged) was 2.87 years, down 0.01 year from last Friday; the median duration (leveraged) was 3.21 years, up 0.04 year from last Friday [45]. - **Duration of Interest - Rate Bond Funds**: It rose to 3.93 years. Among different types of bond funds, the median duration (leveraged) of interest - rate bond funds rose to 3.93 years, up 0.02 year from last Friday; the median duration (leveraged) of credit bond funds rose to 2.98 years, up 0.01 year from last Friday; the median duration (de - leveraged) of interest - rate bond funds was 3.55 years, up 0.09 year from last Friday; the median duration (de - leveraged) of credit bond funds was 2.73 years, down 0.02 year from last Friday [48]. 3.4 Category Strategy Comparison - **China - US Yield Spread**: It generally widened. The 1Y spread widened 3bp, 2Y widened 7bp, 3Y widened 6bp, 5Y widened 5bp, 7Y widened 3bp, 10Y widened about 3bp, and 30Y widened 2bp [52]. - **Implied Tax Rate**: The short - term spread widened, and the long - term spread narrowed. As of July 11th, the spread between China Development Bank bonds and treasury bonds widened 1bp for 1Y, changed less than 1bp for 3Y, widened 2bp for 5Y, widened 1bp for 7Y and 10Y, changed less than 1bp for 15Y, and narrowed 2bp for 30Y [53]. 3.5 Changes in Bond Lending Balance On July 11th, the concentration of lending for active 10Y treasury bonds, active 10Y China Development Bank bonds, second - active 10Y China Development Bank bonds, and active 30Y treasury bonds showed an upward trend, while the concentration of second - active 10Y treasury bonds showed a downward trend. For all institutions, it showed an upward trend [56].

Group 1 - The report highlights that the current net financing by major banks has reached an unprecedented level of 5.3 trillion yuan, which is historically high and linked to the central bank's liquidity support [2][12][16] - It notes that the trend of easing liquidity can be linearly extrapolated, and any disruption to this trend would require additional variables [3][13] - The report suggests that if the liquidity remains loose in July, the long-term interest rates may decline further, with the current 10Y-1Y yield spread at 30 basis points, the highest since mid-February [3][12][13] Group 2 - The report indicates that the leverage ratio in the bond market has risen to 107.85%, reflecting an increase in borrowing activity [23] - It mentions that the average daily transaction volume of pledged repos was approximately 7.6 trillion yuan, with overnight repos accounting for 89.71% of the total [27][31] - The report states that the median duration of medium- to long-term bond funds remains at 2.87 years, indicating stability in fund management strategies [49]

1. Report Industry Investment Rating There is no information provided regarding the industry investment rating in the report. 2. Core Viewpoints of the Report - After the double - rate cut, the short - end of the bond market declined by 5bp. The mid - short end of the bond market showed a significant decline, with the 1Y Treasury bond yield dropping to 1.40%. The long - end was volatile, and the yield curve steepened slightly. The focus in the future may be on the buying power of large banks and the amount of funds lent out [2][11]. - Small and medium - sized banks + foreign capital, money market funds, and mutual funds were the main driving forces for the decline in the yields of Treasury bonds, China Development Bank bonds, credit bonds, and certificates of deposit this week [3][11]. - The bond market leverage ratio continued to fluctuate at a low level, rising to 106.70% overall. However, mutual funds increased leverage, and the long - and medium - term bond fund duration decreased overall. Currently, non - bank institutions may prefer leverage strategies and maintain a neutral attitude towards duration [3][12]. 3. Summary by Relevant Catalogs 3.1 This Week's Institutional Behavior Review - In terms of interest - rate bonds, rural commercial banks and foreign capital were the main driving forces for short - term Treasury bonds, with a net purchase of over 10 billion yuan of Treasury bonds under 1Y this week. Rural commercial banks adopted a barbell - shaped allocation. Money market funds were the main force for increasing the allocation of policy - financial bonds, and insurance institutions continued to increase their allocation of local bonds in the secondary market [2][11]. - In terms of credit bonds and certificates of deposit, non - bank institutions bought a large number of certificates of deposit in the secondary market, with 8 out of 12 types of institutions having net purchases. Mutual funds increased their allocation of 1 - 3Y medium - term notes and increased their buying of Tier 2 capital bonds, with the buying volume of other types of bonds approaching 50 billion yuan this week [3][11]. 3.2 Bond Market Yield Curve and Term Spread 3.2.1 Yield Curve - Treasury bond yields generally declined. The 1Y yield decreased by 4bp, the 3Y by 1bp, the 5Y by 2bp, the 7Y by 1bp, while the 10Y, 15Y, and 30Y yields increased by 1bp, 1bp, and 2bp respectively. In terms of quantiles, the 1Y dropped to the 10% quantile, the 3Y remained at the 6% quantile, etc. [13]. - China Development Bank bond yields also generally declined. The 1Y yield decreased by 9bp, the 3Y by 5bp, the 5Y by 2bp, the 7Y by 3bp, while the 10Y, 15Y, and 30Y yields increased by 1bp, 1bp, and 2bp respectively. In terms of quantiles, the 1Y dropped to the 5% quantile, the 3Y to the 3% quantile, etc. [13]. 3.2.2 Term Spread - For Treasury bonds, the interest - rate spread showed a differentiated trend, and the term spread widened overall. The 1Y - DR001 spread inverted more deeply by 3bp, while the 1Y - DR007 spread inverted less deeply by 13bp. Other term spreads also had different changes in widening or narrowing [15]. - For China Development Bank bonds, the interest - rate spread inversion eased, and the term spread widened overall. The 1Y - DR001 spread inverted less deeply by 20bp, and the 1Y - DR007 spread inverted less deeply by 17bp. Other term spreads also had corresponding changes [16]. 3.3 Bond Market Leverage and Funding Situation 3.3.1 Leverage Ratio - From May 6th to May 9th, 2025, the leverage ratio first increased and then decreased during the week. As of May 9th, the leverage ratio was about 106.70%, up 0.03pct from last Friday and down 0.13pct from Monday [19]. 3.3.2 Average Daily Turnover of Pledged Repurchase - The average daily turnover of pledged repurchase increased compared with last week. From May 6th to May 9th, the average daily turnover of pledged repurchase was about 6.8 trillion yuan, an increase of 2.1 trillion yuan compared with last week. The average overnight proportion was 85.79% [26][27]. 3.3.3 Funding Situation - From May 6th to May 9th, the lending of bank - based funds continued to increase. The net lending of large banks and policy banks on May 9th was 3.26 trillion yuan, and the average daily net lending of joint - stock banks and rural commercial banks was 0.02 trillion yuan, with a net lending of 0.09 trillion yuan on May 9th. The main fund borrowers were mutual funds, and the lending of money market funds continued to decline [31]. - DR007 and R007 continued to decline. As of May 9th, R007 was 1.58%, down 0.26pct from last Friday; DR007 was 1.54%, down 0.26pct from last Friday; the spread between R007 and DR007 was 3.96bp. 1YFR007 and 5YFR007 also continued to decline [31][32]. 3.4 Duration of Long - and Medium - Term Bond Funds - The median duration of long - and medium - term bond funds decreased to 2.74 years (de - leveraged) and 2.99 years (leveraged). On May 9th, the median duration (de - leveraged) was 2.74 years, down 0.06 years from last Friday; the median duration (leveraged) was 2.99 years, down 0.1 years from last Friday [41][43]. - In terms of different types of bond funds, the median duration of interest - rate bond funds (leveraged) increased to 3.78 years, up 0.03 years from last Friday; the median duration of credit bond funds (leveraged) decreased to 2.67 years, down 0.12 years from last Friday. The median duration of interest - rate bond funds (de - leveraged) was 3.36 years, down 0.01 years from last Friday; the median duration of credit bond funds (de - leveraged) was 2.57 years, down 0.05 years from last Friday [48]. 3.5 Comparison of Category Strategies - Sino - US yield spread: The overall inversion deepened. The 1Y spread inverted more deeply by 24bp, the 2Y by 30bp, the 3Y by 28bp, the 5Y by 30bp, the 7Y by 26bp, the 10Y by 19bp, and the 30Y by 15bp [52]. - Implied tax rate: It narrowed overall. As of May 9th, the spread between China Development Bank bonds and Treasury bonds narrowed by 5bp for 1Y, 4bp for 3Y, less than 1bp for 5Y, 2bp for 7Y, and 1bp for 10Y [53]. 3.6 Changes in Bond Lending Balance - On May 9th, the concentration trend of lending of active 10Y Treasury bonds increased, while the concentration trends of lending of less - active 10Y Treasury bonds, active 10Y China Development Bank bonds, less - active 10Y China Development Bank bonds, and active 30Y Treasury bonds decreased [54].