Report Industry Investment Rating - The report does not mention the industry investment rating. Core Viewpoints of the Report - In February, overseas concerns about the disruptive effects of AI increased, leading to a continuous adjustment in the US stock market. The hedging and safe - haven properties of US Treasuries were prominent, and the US Treasury yield curve flattened in a bullish manner. In China, the central bank actively injected funds during the Spring Festival. Although the capital market fluctuated to some extent, it remained stable overall. Before the Spring Festival, the bond market continued its strong performance, and after the festival, it corrected. Throughout the month, the best - performing varieties on the Treasury yield curve were the 5Y - 7Y bonds favored by allocation funds and ultra - long bonds with spread advantages [2]. - Compared with 2025, 19 out of 31 provinces in China lowered their GDP growth targets, and 11 provinces remained basically the same as last year. It is expected that the GDP target center may decline slightly, possibly set in the range of 4.5% - 5%. Consumption remains an important means to expand domestic demand, but most provinces lowered their targets for the growth rate of social retail sales. In terms of investment, emphasis was placed on improving quality and efficiency, and most provinces actively reduced their investment growth rates. In real - estate investment, there was limited incremental content related to the renovation of urban villages and old communities, while investment related to new - quality productivity became an important area of concern. The employment target is expected to remain stable, with the unemployment rate target at around 5.5% or lower and the number of newly - added urban jobs at around 1.2 million or more. The price target is also expected to remain at 2%. After the Two Sessions, the probability of a reserve requirement ratio cut is greater than that of an interest rate cut, and the reserve requirement ratio cut usually occurs earlier. Before and after the Two Sessions, the capital market tends to remain loose, and the yield of 10Y Treasuries is more likely to decline [3]. - After the 10 - year Treasury yield broke through the psychological threshold of 1.8%, the cost - effectiveness of further chasing the rise of Treasuries decreased. However, the capital market is likely to be maintained in a supportive state before and after the Two Sessions, and from the perspective of the calendar effect, the risk of a significant bear market in the bond market is not high. When the 10Y Treasury yield is above 1.80%, investors can make arrangements during market fluctuations. Attention should be paid to the following aspects: whether the boost in equity risk appetite after the Spring Festival can continue, the possible good start of economic data, whether trading funds will reverse their positions near key points, and whether the allocation demand of allocation funds will further decline marginally. Structural opportunities in the bond market include seizing the convex points on the yield curve, such as 20Y local bonds, 10Y Export - Import Bank bonds, and 10Y China Development Bank bonds; paying attention to the opportunity of compressing ultra - long spreads as the current ultra - long spread is at the 91% historical quantile level; and for credit bonds, focusing on bank Tier 2 and perpetual bonds with relatively high yield quantiles, especially the old bonds exempt from value - added tax [4]. Summary According to the Directory PART1: Overseas Risk Sentiment Declines, and the Domestic Bond Market Breaks Key Points 1.1 Overseas: Overseas Risk Sentiment Declines, and the Safe - Haven Property of US Treasuries is Prominent - In February, overseas concerns about the disruptive effects of AI increased, the US stock market continued to adjust, and the hedging and safe - haven properties of US Treasuries were prominent, resulting in a bullish flattening of the US Treasury yield curve [7]. 1.2 Domestic - **Central Bank's Capital Injection and Leverage Ratio**: The central bank actively used various tools to support the capital market. It restarted 14 - day reverse repurchase, net - injected 1.25 trillion yuan of short - term cross - festival funds through 7 - day and 14 - day reverse repurchases from February 9th to 14th, net - injected 100 billion yuan of 3 - month and 50 billion yuan of 6 - month outright reverse repurchases before the Spring Festival, and carried out a 600 - billion - yuan 1 - year MLF operation on February 25th, with a net injection of 300 billion yuan. After considering the outright reverse repurchases, the medium - and long - term liquidity injection in February reached 900 billion yuan. As of February 25th, the inter - bank leverage ratio fluctuated and declined to below the median level, reaching the 46.5% quantile level since 2024 [9][10][12]. - **Bond Market Performance**: In February, with the central bank's increased support for liquidity, sufficient bank liabilities, the promotion of allocation funds, and the takeover of trading funds, the bond market continued its strong performance. The closing yield of the active 10Y Treasury bond 250016 successively broke through the three resistance levels of 1.80% - 1.78%. After the Spring Festival, affected by factors such as the "Shanghai Seven - Point Plan" for the real - estate market, the good start of the stock market, and the market's profit - taking sentiment, the yield of the 10Y Treasury bond slightly increased. Throughout the month, as of February 25th, the best - performing varieties on the Treasury yield curve were the 5Y - 7Y bonds favored by allocation funds and ultra - long bonds with spread advantages [14]. - **Institutional Behavior** - **Allocation Funds**: The allocation power of large - scale banks for Treasuries weakened, and they reduced the weekly net purchase scale of 3 - 10Y Treasury bonds. The bond - allocation scale and duration of insurance companies were basically at the seasonal level, and they reduced their allocation of inter - bank certificates of deposit and other varieties while maintaining their preference for local bonds. Affected by the misaligned Spring Festival, the bond - allocation scale of wealth management products declined in February. Before the Spring Festival, they seasonally reduced their allocation of credit bonds, inter - bank certificates of deposit, and policy - based financial bonds, but usually increased their allocation after the Spring Festival [21][25][37]. - **Trading Funds**: Small and medium - sized banks reduced their duration, while funds increased their duration. In February, small and medium - sized banks mainly sold 7 - 10Y bonds and ultra - long Treasuries, and funds increased their positions in 7 - 10Y policy - based financial bonds and ultra - long Treasuries [31]. PART2: Outlook for the 2026 Two Sessions and the Calendar Effect of the Bond Market 2.1 Under the Goal - Oriented Approach of Positively Seeking Practical Results, the GDP Growth Target May be between 4.5% - 5% - Compared with 2025, 19 out of 31 provinces lowered their GDP growth targets, and 11 provinces remained basically the same. Since the national GDP growth target is generally lower than the weighted target of local GDP growth, it is expected that the GDP target center may decline, possibly set in the range of 4.5% - 5%. In 2026, 15 out of 31 provinces announced their average annual GDP growth targets for the "14th Five - Year Plan" period, with 11 provinces such as Guangdong, Henan, Jiangsu, and Shanghai setting the target at 5% [46]. 2.2 Consumption Remains an Important Means to Expand Domestic Demand, and Investment Emphasizes Improving Quality and Efficiency - **Consumption**: Consumption remains an important means to expand domestic demand. Service - related consumption has been further emphasized, and cultural, tourism, duty - free, and sports event consumption have become new hotspots. However, most provinces lowered their targets for the growth rate of social retail sales, indicating that there is still room to boost consumer demand. The average target growth rate of social retail sales in 2025 was 5.65%, while in 2026, it was only 4.79%, a decrease of 0.86% [52]. - **Investment**: In 2026, most provinces actively reduced their investment growth rates. In real - estate investment, there was limited incremental content related to the renovation of urban villages and old communities. At the same time, new - quality productivity - related areas such as artificial intelligence, low - altitude economy, commercial aerospace, and future industries have become the focus of local government work reports [52]. 2.3 Employment and Price Targets are Expected to Remain Stable - The employment target is expected to remain stable, with the unemployment rate target at around 5.5% or lower and the number of newly - added urban jobs at around 1.2 million or more. In 2026, the targets for newly - added employment and surveyed unemployment rates in most provinces are the same as last year, and it is expected that the national surveyed unemployment rate target will continue to be maintained at 5.5%. In 2025, the national newly - added urban jobs reached 12.67 million, and the average surveyed unemployment rate was 5.2%, meeting the targets set at the beginning of the year. - The price target is expected to be stable at 2%. In 2026, most local governments set their CPI growth targets at 2%, the same as last year. Based on past experience, the national CPI target growth rate is generally consistent with the local targets, so it is expected that the national CPI target growth rate in 2026 will also be 2% [57]. 2.4 Patterns after the Two Sessions: The Probability of a Reserve Requirement Ratio Cut is Greater than that of an Interest Rate Cut, and the Bond Market Presents More Opportunities than Risks - **Monetary Policy**: The probability of a reserve requirement ratio cut after the Two Sessions is greater than that of an interest rate cut. Reserve requirement ratio cuts usually occur 1 - 3 months after the Two Sessions, while interest rate cuts usually occur more than 3 months after the Two Sessions [58]. - **Bond Market Patterns**: Before and after the Two Sessions, the capital market tends to remain loose, and the yield of 10Y Treasuries is more likely to decline after the Two Sessions. In 2025, the significant increase in the yield was due to the correction of bond market expectations after the central bank tightened the capital market in February [58]. PART3: Bond Market Strategy for March 2026 3.1 The Bond Market Can be Arranged during Interval Fluctuations, and Attention Should be Paid to Several Aspects of Evolution - After the 10 - year Treasury yield broke through the psychological threshold of 1.8%, the cost - effectiveness of further chasing the rise of Treasuries decreased. However, the capital market is likely to be maintained in a supportive state before and after the Two Sessions, and the supply pressure may also decline. From the perspective of the calendar effect, the risk of a significant bear market in the bond market is not high. When the 10Y Treasury yield is above 1.80%, investors can make arrangements during market fluctuations. Attention should be paid to whether the boost in equity risk appetite after the Spring Festival can continue, the possible good start of economic data, whether trading funds will reverse their positions near key points, and whether the allocation demand of allocation funds will further decline marginally [64]. 3.2 Structural Opportunities in the Bond Market - Seize the convex points on the yield curve, such as 20Y local bonds, 10Y Export - Import Bank bonds, and 10Y China Development Bank bonds. - Pay attention to the opportunity of compressing ultra - long spreads as the current ultra - long spread is at the 91% historical quantile level. - For credit bonds, focus on bank Tier 2 and perpetual bonds with relatively high yield quantiles, especially the old bonds exempt from value - added tax [68].

Group 1 - The US stock market experienced a decline this week due to "AI panic trading" and increased probabilities of the Federal Reserve maintaining its policy unchanged after the January non-farm employment report [1] - Despite a generally favorable macro environment with steady job growth and easing inflation, concerns over cost and profit margin pressures for tech companies have dampened investor optimism [1] - The ability of tech stocks to stabilize and the strengthening of interest rate cut expectations from the Federal Reserve will be crucial for market recovery in the coming week [1] Group 2 - The Federal Reserve's interest rate cut expectations have slightly increased, with mixed economic data being digested by investors [2] - Retail sales data showed weakness, with December sales flat month-on-month, below the previous value of 0.6% and the expected 0.4% [2] - The January non-farm payroll report indicated a significant increase of 130,000 jobs, surpassing the market expectation of 65,000, with the unemployment rate dropping to 4.3% [2] Group 3 - Economic signals are mixed, with the January employment report contradicting the narrative of stagnant hiring, while retail sales data challenges the view of strong consumer spending [3] - The yield curve for US Treasury bonds has flattened, with the 2-year yield dropping to its lowest level since 2022, approaching 3.40% [3] - The inflation report appears encouraging, with housing prices slowing and tariff-related impacts diminishing, leading to expectations of two interest rate cuts later this year [3] Group 4 - The recent decline in retail sales is viewed as a temporary pause following strong spending, with tax refunds and robust wage growth expected to support consumption recovery in the coming months [4] - The significant increase in non-farm employment is concentrated, raising questions about its sustainability due to demographic constraints and weakening labor demand in other sectors [4] Group 5 - The US stock indices fell over the past week, with investors continuing to reduce exposure to tech stocks, leading to a decline in the S&P 500 index [5] - Concerns regarding the impact of new AI tools on specific industries have caused market volatility, initially affecting software and financial stocks, and later spreading to real estate and logistics companies [5] Group 6 - The financial sector experienced the largest decline this week, down 4.8%, followed by communication services down 3.5%, while utilities saw a significant increase of 7.1% due to safe-haven inflows [6] - Other sectors such as real estate and materials also recorded gains of over 3%, while energy, consumer staples, and industrial sectors showed positive performance [6] Group 7 - The introduction of AI tools by companies like Altruist has raised concerns about job displacement, leading to a cautious sentiment among traders [7] - The market's reaction to AI-related news has resulted in a "sell first, ask questions later" approach, with fears of AI disruption affecting various sectors beyond just software [7] Group 8 - The outlook for the next week suggests that a significant decline in Treasury yields could typically act as a bullish catalyst for the stock market, but bearish signals in the tech sector indicate potential further downside risks [8] - The volatility index (VIX) remains around 20, indicating that the market is seeking protective measures and may maintain higher-than-average volatility in the short term [8]