Group 1: Insurance Sector Insights - The recent adjustment in the predetermined interest rate for life insurance is expected to alleviate the pressure of interest rate losses, maintaining an "overweight" rating for the industry [2][5][24] - The insurance industry association has announced a new predetermined interest rate of 1.99%, triggering a mechanism for rate adjustments, with major insurers planning to switch to new products by September [3][4][22] - The adjustment of the predetermined interest rates is anticipated to improve the cost of liabilities, with a focus on transforming towards floating income products [4][24] Group 2: Fixed Income Market Analysis - The bond market has experienced significant fluctuations due to various factors, including tightening liquidity and rising commodity prices, leading to a notable decline in bond prices [7][9] - The current high duration and leverage in the bond market limit the strategic flexibility of investors, making them more vulnerable to market volatility [8] - The recent rise in commodity prices poses a greater threat to the bond market than previous stock market gains, as it contradicts the fundamental pricing of bonds [9] Group 3: Investment Recommendations - The report suggests increasing holdings in major insurance companies such as New China Life, China Life, China Pacific Insurance, and Ping An Insurance due to expected improvements in profitability and asset-liability matching [5][24] - The insurance sector is projected to see stable profit growth in the first half of 2025, driven by a recovery in the stock and bond markets [22][24] - The report emphasizes the importance of focusing on undervalued insurance stocks for potential valuation recovery opportunities [24]

Report Industry Investment Rating No relevant content provided. Core View of the Report - In the past week, the bond market continued to correct, hitting the largest decline since April. The correction was due to multiple negative factors such as the stock - bond seesaw, commodity price increases, and tightened funds. After the central bank's MLF and OMO injections on Friday, the decline converged [8][13]. - There are three key considerations for this bond market correction: the reason for the lack of a double - bull market in stocks and bonds lies in actual money flows and central bank's money supply; high - duration crowding restricts the bond market's strategic space; the impact of commodity price increases on the bond market is greater than that of the previous rise in financial stocks [8][13]. Summary by Directory 1. Three Reflections on the Current Bond Market Correction 1.1 Why There Is No Double - Bull Market in Stocks and Bonds - The stock - bond seesaw after July deviated from the normal logic of the DDM model. The outflow of funds from the bond market and the tightened expectation of central bank's injection might be the main reasons. The funds flowing into the bond market are not cheap, and there is also an issue of funds overflowing to the equity market due to low bond market interest rates [8][13]. - The strength of the equity market led to the outflow of high - risk - preference funds from the bond market. Currently, the bond market is in a situation where the stock is strong and the bond is weak, with the cash - CD spread widening and the rising capital interest rate further suppressing the bond market. However, in 2015, even when the stock market was extremely bullish, the yield of the 10 - year Treasury bond only increased by about 20bp [14]. - Under the current stable and loose monetary policy, funds flow more strongly into the equity market than the bond market. In reality, equity institutions rely on funds "overflowing" from the bond market; in terms of expectations, the central bank's loose policy statements boost market sentiment. Since 2025, both aspects have been positive for the equity market. On the contrary, the central bank's cautious medium - term capital injection has led to an obvious outflow of institutional funds from the bond market, and the bond market faces the problem of expensive medium - term stable funds [15]. - The key for the bond market to strengthen lies in whether the CD rate can decline naturally. In the short term, observe the decline rate of cross - month CDs and gradually increase positions following the downward trend. In the long term, 1.7% may be a hard resistance level for 1 - year CDs, and as bank funds stop flowing out and the replacement of deposit rates is completed, the CD rate may decline naturally [5][19]. 1.2 What High - Duration Crowding Means - Around June, the bond market saw consistent bullish expectations, crowded institutional behaviors, and rising bond fund durations, but the cash bond interest rate did not decline significantly. Although the long - term logic is still optimistic, high leverage has led to a lack of strategic adjustment space and defensive flexibility for investors, making it difficult to wait for the long - term logic to materialize [6][22]. - In a high - duration and high - leverage environment, the cash bond position adjustment mode is limited, and only "buying short and selling long" can be used. When long - and short - term expectations deviate, the market tends to sell long - term bonds. Moreover, asset management institutions face liability - side pressure and may be forced to sell bonds, making it difficult to maintain long - term positions [6][23]. - In an environment where institutional behaviors are highly crowded but expectations are not met, investors can actively reduce duration exposure or switch to more liquid assets. Although the bond market stabilized slightly on Friday, the bulls in Treasury bond futures are still fragile. It is recommended to wait for the improvement of sentiment and technical indicators before betting on the next possible positive factors [6][28]. 1.3 The Difference in the Impact on the Bond Market between Commodity and Financial Stock Price Increases - The rise in commodity prices has a greater impact on the bond market than the previous rise in bank stocks. Bank stocks and bonds are both safe - haven assets under the expectation of a gentle economic recovery, and their fluctuations only lead to a mild adjustment of funds between stocks and bonds. However, the rise in commodity futures reflects the expectation of economic recovery, which is completely opposite to the underlying logic of the bond market's strength. Once commodities continue to strengthen, it will subvert the core pricing basis of the bond market and cause violent fluctuations [8][29]. - Currently, only supply - side changes have occurred, and the recovery of demand is still unclear. There is no need to rush to revise the expectation of the interest rate center upwards in the short term [29]. 2. Weekly Bond Market Review - **Funds**: From July 21st to July 25th, 2025, the central bank conducted 16,563 billion yuan of open - market reverse repurchases, with 17,268 billion yuan maturing, resulting in a net withdrawal of 705 billion yuan. The DR001 rate rose 6.08bp to 1.52%, the DR007 rate rose 14.56bp to 1.65%, and the 1 - year AAA CD rate rose 5.75bp to 1.68% [31]. - **Cash Bonds and Futures**: Referring to ChinaBond valuations, the yields of 2 - year, 5 - year, 10 - year, and 30 - year Treasury bonds rose 5.52bp, 7.92bp, 6.72bp, and 8.4bp respectively. The yields of 2 - year, 5 - year, 10 - year, and 30 - year CDB bonds rose 5.58bp, 9.53bp, 9.05bp, and 4.93bp respectively. The closing prices of TS, TF, T, and TL main contracts fell 0.12%, 0.4%, 0.56%, and 2.08% respectively. - **Primary Market**: In the past week, 81 interest - rate bonds were issued, totaling 939.8 billion yuan, including 5 Treasury bonds worth 406 billion yuan, 15 policy - bank bonds worth 158 billion yuan, and 61 local government bonds worth 375.8 billion yuan. The total repayment of interest - rate bonds last week was 618.6 billion yuan, with a net financing of 321.2 billion yuan [33]. - **Market Sentiment**: Throughout the week, the stock - bond seesaw and tight funds pressured the bond market sentiment, and interest rates fluctuated upwards. At the beginning of the week, the start of the Yarlung Zangbo River hydropower project and market speculation on policies led to the strengthening of stocks and commodities, and the bond market sentiment was continuously pressured. On Thursday night, the central bank's window guidance and increased OMO injection on Friday provided some support to the bond market, and interest rates declined slightly [34]. 3. Relative Asset Value 3.1 Overall Expansion of Yield Spreads of Treasury and CDB Bonds at Various Maturities - Except for the long - end CDB yield spread (30Y - 10Y), the yield spreads of Treasury and CDB bonds at various maturities generally expanded, and most were still below the median of historical percentiles. The spread between Treasury and CDB bonds also expanded. The spread between new and old bonds generally contracted, especially the spread between new and old Treasury bonds [44]. - The non - CDB - CDB yield spread expanded or contracted differently, and the local government bond yield spread generally contracted [44]. 3.2 Credit Bonds: Overall Widening of Maturity and Credit Spreads - The maturity spreads of various credit bonds generally widened. The maturity spreads of enterprise bonds and secondary - capital bonds showed a pattern of long - end contraction and short - end expansion. The credit spreads of various credit bonds generally expanded, and most were still below the median of historical percentiles [46].