Report Industry Investment Rating - No information provided Core Viewpoints of the Report - Maintain a buy rating on VDNWDL 9 Perp despite weaker 1HFY26 results, considering the higher certainty of coupon payments [7] - The US-Israel bombing against Iran may lead to lower UST rates and wider credit spreads in the Middle East, with varying impacts on different credit segments [13] Summary by Relevant Catalogs Trading Desk Comments - On last Friday, SUMITR Float 29s tightened 6bps, SUMITR Float 31s tightened 15bps; fixed-rate SUMITR 29s were unchanged, SUMITR 31s tightened 6bps, and SUMITR 36s widened 5bps [2] - Chinese IG space: belly-to-long-end TMT names LENOVO/XIAOMI/JD/KUAISH/MEITUA widened 1 - 6bps, while AMC space held firm; Taiwanese lifers traded 1 - 5bps wider; in HK, LINREI and HKE 36 softened up to 5bps wider; NWDEVL/VDNWDL complex leaked up to 1.1pts; NWD will defer coupon payment on USD1.3bn NWDEVL 6.25 Perp due on 7 Mar'26, and its 1H26 core operating profit dropped 18% yoy to HKD3.64bn (cUSD465.3mn) [2] - Chinese properties: FTLNHD 27 rose 1.8pts, FTLNHD 26 was 0.1pt higher, FTLNHD 29/FUTLAN 28 were 0.3 - 0.4pt lower; VNKRLE 27 - 29 dropped 2.6 - 2.9pts [2] - SE Asian space: long-end PETMK widened 6bps, OCBCSP 36 widened 3bps, GLPSP 4.5 Perp lost 1.0pts, ReNew Energy complex edged 0.1 - 0.3pt higher, VLLPM 27 - 29 recovered 1.0 - 1.4pts, SMCGL Perps were unchanged to 0.2pt higher [2] - KR space: POHANG/HYNMTR/LGENSO traded 2 - 4bps wider, lower-spread/bank-guaranteed names SKBTAM/KHFC/HYUELE closed 1 - 3bps wider, and the new issue DAESEC 31 softened to 5bps wider [2] - JP space: heavy selling on bank 10yr fixed tranches MIZUHO/SUMIBK/MUFG, which widened up to 8bps; insurance subs were 0.1pt weaker, led by RESLIF 6.875 Perp; Yankee AT1s were down by 0.4 - 0.9pt, led by UBS 7 Perp/BNP 6.875 Perp/INTNED 6.5 Perp [2] - FRN space: solid buying support for CCAMCL and EU/JP/AU bank FRNs [2] - This morning, AT1s and JP insurance subs were down another 0.1 - 0.5pt; Asian IG space initially widened 5 - 10bps and later recovered 2 - 3bps; heavy selling on XIAOMIs and TW lifers, and two-way flows on Middle Eastern names; FTLNHD 27 edged 0.3pt higher, while VLLPM 29/ACPM 4.85 Perp were 1.2 - 1.7pts lower [3] - In LGFV space, overall balanced two-way flows in moderate size across the credit curve, and prices remained largely stable [4] Last Trading Day's Top Movers - Top Performers: HMELIN 5 1/4 04/28/27 rose 2.1pts to 102.3; FTLNHD 11.88 09/30/27 rose 1.8pts to 97.4; VLLPM 9 3/8 07/29/29 rose 1.4pts to 42.0; VLLPM 7 1/4 07/20/27 rose 1.0pts to 53.2; CHGRID 4.85 05/07/44 rose 1.0pts to 103.2 [5] - Top Underperformers: VNKRLE 3.975 11/09/27 dropped 2.9pts to 44.5; VNKRLE 3 1/2 11/12/29 dropped 2.6pts to 42.0; NWDEVL 6 1/4 PERP dropped 1.1pts to 67.7; GLPSP 4 1/2 PERP dropped 1.0pts to 69.5; UBS 7 PERP dropped 0.9pts to 100.8 [5] Macro News Recap - Last Friday, S&P (-0.43%), Dow (-1.05%), and Nasdaq (-0.92%) were lower; over the weekends, US-Israel struck Iran, and Iran counterattacked across the Middle East; US Jan'26 PPI was +0.5% mom, higher than the market expectation of +0.3% mom; US Feb'26 Chicago PMI was 57.7, higher than the market expectation of 52.0; UST yield was lower on last Friday, with 2/5/10/30 year yield at 3.38%/3.51%/3.97%/4.64% [6] Desk Analyst Comments - Maintain buy on VDNWDL 9 Perp, as NWD confirmed the continued suspension of ordinary dividends and coupon payments on its USD NWDEVL Perps; it is exploring all available funding channels to optimize cash flow and has no imminent rights issues or share placements plan [7] - NWD reported weaker 1HFY26 results with core operating profit falling 18% yoy to HKD3.6bn, due to a 50% yoy decline in revenue from fewer property projects delivered in mainland China and a drop in construction revenue, partly offset by an 18% yoy decrease in G&A expenses; gross profit declined 25% yoy, and gross margin increased to 60.0%; attributable net loss narrowed to HKD3.7bn from HKD6.6bn in 1HFY25 [8] - Contract sales and non-core disposals (NCD) totaled HKD13.8bn in 1HFY26, on track to meet its FY26 target of HKD27bn; pre-sales of some projects were well received; available saleable resources in HK in 2HFY26 include Pavilia Rosa, Grand Austin Bohemian, The Pavilia Farm; 1HFY26 capex was contained at HKD3.5bn against a full-year target of below HKD12bn [9] - As of Dec'25, net debt edged up marginally to HKD131.9bn from HKD129.6bn in Jun'25 due to lower cash balance; net gearing rose to 59.7% from 58.1%; NWD completed the exchange offer for USD bonds and perps in Nov'25, reducing outstanding perps and bonds by cHKD8.7bn and cHKD0.4bn respectively, totaled cHKD9.1bn; debts maturing over the next two years dropped to HKD36bn from HKD65bn; gross finance costs fell 11% yoy to HKD2.3bn in 1HFY26, and the average funding cost dropped to 3.9% from 4.7% in 1HFY25 [10][11] Quick Thoughts on US-Israel's Bombing Against Iran - Immediate impact: lower UST rates and wider credit spread of Middle East names; this morning, Asia opened with a wait-and-see tone; 10-yr UST opened 6 - 7bps lower and the decline narrowed to 3 - 4bps; credit spread of the Middle East widened 5 - 10bps; two-way flows on Middle East credits with selling in banks and buying in oil names; Brent Crude rose to cUSD77 a barrel this morning from cUSD73 on last Friday [13] - Prolonged and escalated conflict: the conflict may last longer and spill over wider than the 12-day War in last June; the key difference is the killings of Iranian supreme leader and his families; there are incentives for the US and Iran to contain the conflict, but how Iran and its allies will retaliate and how the US and Israel will respond are highly uncertain [14] - Varying impacts on credits: negative to Middle East credits in general; more negative impact on port operators, properties, and banks; higher oil and commodity prices could benefit oil and mining companies, quasi-sovereigns, and sovereigns, assuming the conflict does not materially affect oil production and FDI in GCC countries [15] Offshore Asia New Issues - No offshore Asia new issues were priced today [19] - Pipeline: Chang Development International plans a 3yr USD issue with a 5.4% coupon and a Baa2/-/- rating; Government of Mongolia plans a 6yr USD issue with a 6.3% coupon and a B1/BB-/- rating; Shaoxing Shangyu State-owned plans a 3yr USD issue with a 4.35% coupon and a -/-/BBB- rating [21] News and Market Color - On last Friday, 36 credit bonds were issued onshore with an amount of RMB21bn; in Feb'26, 1,075 credit bonds were issued with a total amount of RMB816bn, a 34.2% yoy decrease [24] - China new home prices posted the steepest drop in more than three years in Feb'26 [24] - Macau gaming revenue for Feb'26 rose 4.5% yoy to MOP20.6bn [24] - CTF Services plans full early redemption of HKD850m convertible bonds due 2027 [24] - Dalian Wanda Commercial Management sold Shanghai Zhuanqiao Wanda Plaza for RMB2.1bn (cUSD298mn) [24] - Fosun International plans to repurchase up to HKD1bn (cUSD127.8m) of its shares [24] - Minmetals Land's scheme of arrangement to take the company private became effective on 27 Feb'26 [24] - SoftBank Group will invest an additional USD30bn in OpenAI as part of a USD110bn financing round at a USD730bn pre-money valuation [24] - Swire Pacific agreed to sell a 30% stake in its Coca-Cola bottling operations in Vietnam for USD221.1m in cash [24] - China Vanke terminated its RMB15bn (cUSD2.2bn) share issuance plan initiated in 2005 [24] - HKEx is still reviewing ENN Natural Gas listing application related to ENN Energy's privatisation [24]

Core Viewpoint - The bond secondary market experienced a slight cooling in trading activity in January 2026, with total transactions amounting to 358,682.06 billion yuan, a month-on-month decrease of 4.80%, but a year-on-year increase of 27.95% due to the timing of the Spring Festival [1][3]. Trading Activity - In January, the total transaction amount in the bond secondary market was 358,682.06 billion yuan, reflecting a month-on-month decline of 4.80% but a significant year-on-year increase of 27.95% [1]. - The trading volume of interest rate bonds reached 227,087.36 billion yuan, showing a year-on-year growth of 30.40% and a month-on-month increase of 3.34%, indicating strong trading resilience [3]. - Credit bonds (excluding interbank certificates of deposit) had a transaction amount of 83,606.03 billion yuan, with a year-on-year increase of 64.88% but a month-on-month decrease of 6.02%, contributing to the overall cooling of market activity [3]. Credit Spread Analysis - The credit spread narrowed to 38.11 basis points by the end of January, down 4.21 basis points from the previous month and 27.72 basis points from the same period last year, supported by the central bank's liquidity injections [2][3]. - Most industries saw a narrowing of credit spreads, with the largest reduction in the basic chemical industry at 24.39 basis points, while the household appliances and electronics sectors experienced widening spreads [4]. Industry-Specific Insights - As of January 30, 2026, the highest credit spreads were observed in the household appliances, real estate, and power equipment sectors, while the lowest were in the telecommunications and public utilities sectors [4]. - The credit spread for urban investment bonds shifted from an upward trend to a downward trend, narrowing by approximately 8 basis points in January, with most regions experiencing reduced volatility [4]. Market Outlook - The bond market is expected to maintain a pattern of liquidity support and structural differentiation, likely resulting in a stable trading environment [5][6]. - Post-Spring Festival, market liquidity is anticipated to gradually return to normal, with the central bank expected to continue a prudent monetary policy to ensure stable liquidity [6]. - Structural differentiation will persist, with industry rotation in the credit bond market and regional disparities in urban investment bonds, influenced by economic and fiscal strength [6].

Report Summary 1. Report Industry Investment Rating - Not provided in the given content. 2. Core Viewpoints - The Macau gaming industry showed a solid start in 2026 with a 24% year-on-year growth in January's GGR, reaching 90.7% of the January 2019 level. The 2026 GGR target of MOP236bn seems conservative based on the 2025 growth momentum [7][10][11]. - In the fixed - income market, there were various price movements across different sectors such as Chinese/HK higher - yielding space, Chinese properties, SE Asian space, etc. Some bonds tightened while others widened or declined in price [2]. - Chinese IG KUAISH/MEITUA recovered and tightened 1 - 3bps in the morning [3]. 3. Summary by Directory Trading Desk Comments - In the FRN space, there were balanced two - way flows across AU/JP financial names, MAYMK, 2 - 3yr Korean quasi - sovereign issues, and HYNMTR, with the latter closing 1 - 2bps tighter. Front - end to belly Chinese AMC papers, POE/TMTs, and belly financial papers saw initial selling, widening spreads by 1 - 3bps, but spreads largely closed unchanged. TW lifers widened 3 - 5bps, and the Macau gaming complex had a range of - 0.2pt to + 0.1pt change. In Chinese/HK higher - yielding space, WESCHI 26 rose 1.4pts and WESCHI 28 edged 0.2pt higher, while EHICAR 26 - 27 dropped 0.7 - 2.3pts. In Chinese properties, VNKRLE 27 - 29 were 0.9 - 1.7pts lower. In SE Asian space, VLLPM 27 - 29 dived 7.6 - 9.6pts [2]. - In the morning, Chinese IG KUAISH/MEITUA recovered and tightened 1 - 3bps. RMs were buying perps, and PBs were switching out of short - dated to call EU AT1s. ACPM 4.85 Perp/FAEACO 12.814 Perp were 0.7 - 0.9pt lower, and NWDEVL 27 - 28 recovered 0.5 - 0.6pt [3]. Macro News Recap - On Monday, S&P (+0.54%), Dow (+1.05%), and Nasdaq (+0.56%) were higher. The S&P Global Manufacturing January 2026 PMI was 52.4 (higher than the expected 51.9), ISM Manufacturing January 2026 Prices was 59.0 (lower than the expected 59.3), and ISM Manufacturing January 2026 PMI was 52.6 (higher than the expected 48.5). The UST yield was higher, with 2/5/10/30 - year yields at 3.57%/3.83%/4.29%/4.90% [6]. Desk Analyst Comments - Macau's gross gaming revenue (GGR) in January 2026 increased 24.0% year - on - year to MOP22.6bn, representing 90.7% of the January 2019 GGR and being the highest January figure since 2019. The 2026 GGR target of MOP236bn seems conservative as GGR in 2025 increased 9.1% to MOP247.4bn, exceeding the revised forecast of MOP228bn. The 2026 forecast represents a 3.5% year - on - year growth from the 2025 revised GGR forecast. In 2025, Macau's tourist arrival was 40.1mn, a 15% year - on - year increase and exceeding the 2019 record [7][10][11]. - Macau gaming bonds are considered lower - beta and good carry plays. Top picks are MPELs and STCITYs, and WYNMAC'27 and '29 are yield pick - up plays. The report is neutral on MGMCHIs, SANLTDs, and SJMHOLs [13]. Offshore Asia New Issues - Priced: CMBC International Funding (HK) issued USD300mn with a 3 - year tenor at SOFR + 60, rated - / - /BBB - [17]. - Pipeline: No offshore Asia new issues pipeline on this day [18]. News and Market Color - There were 89 credit bonds issued onshore yesterday with an amount of RMB88bn. No credit bonds were issued on 2 Feb 2025 due to the Chinese New Year holiday. Trump said he would roll back 25% punitive tariffs and cut the levy on Indian goods to 18% from 25% in return for India stopping buying Russian oil. China's local government debt increased 15% in 2025 and remains manageable. Indonesia's coal exports declined 19.7% last year to USD24.5bn due to falling global prices. Huatai Securities raised USD698.6mn by selling HKD and RMB - denominated guaranteed bonds due 2028. UPL Limited 9MFY26 EBITDA rose 22% year - on - year to INR59.1bn (cUSD648mn) [19][20].

Summary of Conference Call on Convertible Bonds and Credit Bonds Market Industry Overview - The conference call discusses the convertible bonds and credit bonds market, highlighting the current trends, risks, and investment strategies. Key Points on Convertible Bonds Market - **Supply and Demand Imbalance**: The convertible bond market is experiencing a supply-demand imbalance, leading to a continuous increase in valuations. The total outstanding convertible bonds have decreased by approximately 1 trillion, leaving around 6 trillion in circulation. This has resulted in strong demand and high valuations, with the median price surpassing 130 yuan and the proportion of bonds priced below 100 yuan dropping to below 30% [2][3] - **Market Volatility**: The characteristics of convertible bonds are diminishing, leading to increased volatility in the market. The overall market valuation is currently in a historically high fluctuation range [1][2] - **Investment Strategy**: It is recommended to adopt a defensive strategy in the short term while also considering high-elasticity varieties and focusing on coupon-bearing assets. Caution is advised when pursuing long-term credit bonds [1][6] Key Points on Credit Bonds Market - **Yield Trends**: In October, credit bond yields have declined across the board, with long-term credit bonds seeing increased trading activity. The weighted average transaction duration has risen to approximately 2.5 years, indicating enhanced liquidity [5][6] - **Performance of Financial Leasing Sector**: The financial leasing sector has shown significant performance, with yield spreads narrowing by about 15 basis points [5] - **Investment Outlook**: The overall outlook for the credit bond market remains optimistic, although a slight downward adjustment in rhythm is expected. It is suggested to maintain a cautious approach towards long-term credit bonds while focusing on short to medium-term credit as a foundational strategy [5][6] Risks and Opportunities - **Risks**: The primary risks in the convertible bond market include high valuation levels and potential slow downward adjustments. However, strong demand and equity support mitigate significant downside risks [3] - **Opportunities**: There are opportunities in industrial bonds, particularly in local state-owned enterprises within construction, coal, and steel industries, where yield spreads are relatively thick. Additionally, perpetual bonds present a good cost-performance ratio for medium to long-term investments [3][13] Recommendations for Bond Investment Duration - **Duration Strategy**: It is advised to extend the bond investment duration to around three years, as this is considered a suitable timeframe despite the potential for yield spread compression in the two to three-year range [8] Specific Investment Focus Areas - **Individual Stock Opportunities**: Attention should be given to steep yield curves, private bonds, perpetual bonds, and ETF components, particularly those related to technology innovation bonds, which may have underpriced valuations due to liquidity differences [9][10] - **Regional Investment Opportunities**: Regions such as Hubei, Henan, Shandong, and Tianjin are highlighted for their attractive yield spreads, with specific areas showing spreads exceeding 40 basis points [12] Conclusion on Credit Bond Investment Strategies - **Overall Strategy**: The strategy for credit bond investment should focus on the 3-5 year yield spreads, which still have compression potential. Increased allocation to perpetual bonds is recommended, especially in light of the market's recovery from previous pessimistic interpretations of regulatory changes [16]

Core Insights - The preferred perpetual stock STRD is being overlooked by investors due to its junior security status, which contrasts with the senior instrument STRF that attracts more attention [1][5] Summary by Category Investment Instruments - STRF is a senior security that is prioritized for payouts, trading above par at $109, with an effective yield of 9.1% and a lifetime return of 29% [3] - STRD, as a junior security, offers a higher effective yield of 12.7% but is trading below par at $78, with a lifetime return of -7% [4] - The difference in risk-return profiles between STRF and STRD highlights that STRF provides safer yields while STRD compensates for higher risk with greater potential returns [5] Market Dynamics - A credit spread has emerged between STRF and STRD, driven by their classifications as senior and junior securities, raising questions about investor preferences [5] - Despite concerns about dividend payments on STRD, the company is expected to maintain these payments to protect STRD's price, as failing to do so would be detrimental [6] Company Actions - The company has recently purchased more bitcoin, holding a total of 640,250 BTC, even as its stock price has struggled, down 4% year-to-date [7]

Group 1 - The Federal Reserve has cut rates for the first time this year by 25 basis points, leading to a rise in bond yields and the lowest credit spreads since 1998 [1][2][3] - The market is adjusting to a less aggressive rate-cutting cycle, with the two-year yield reflecting this shift [3][4] - There is a split within the Federal Reserve committee regarding future rate cuts, with some members advocating for one or fewer cuts for the remainder of the year [6][7][8] Group 2 - The consensus among economists suggests that there may be only one more rate cut this year, despite the Fed's recent actions [7][8] - The labor market remains a point of confusion, with expectations of upward revisions to payroll data, indicating a stable economy [10][11][12] - Inflation concerns persist, with the Fed's target of 2% being questioned as historical data suggests higher average inflation rates [14][15][17] Group 3 - The credit market is expected to perform well into the fourth quarter, supported by the Fed's rate cuts and a focus on growth [27][28] - There is a notable shift in credit spreads, with expectations of spreads moving into the 60s, despite the Fed's actions [29] - M&A activity is anticipated to pick up, which could create supply in the credit markets, although refinancing remains the primary activity currently [31][32][36]

Group 1 - The core viewpoint of the articles indicates that the restoration of VAT on bond interest will create a temporary advantage for existing bonds (old bonds) over newly issued bonds (new bonds), leading to significant market fluctuations [1][2] - The yield of 10-year government bonds fell to around 1.68% before rising back above 1.7% in the afternoon, reflecting the market's reaction to the new tax policy [1] - Institutions predict that the yield spread between old and new bonds could reach 5 to 10 basis points (BP), with new bond yields likely increasing more than the decrease in old bond yields [2][3] Group 2 - Different institutions will be affected variably by the tax policy change, with banks facing the highest tax burden at 6.34% for new bonds, while asset management products will face a lower rate of 3.26% [3] - The tax burden on financial institutions may lead to a shift in investment strategies, with public funds potentially gaining a relative tax advantage, encouraging more bank funds to invest in bonds through public funds [3] - The long-term direction of the bond market will still be determined by fundamental factors, despite short-term trading opportunities created by the new tax policy [4]

Financial Data and Key Metrics Changes - For calendar Q1, the company reported a net loss of $0.23 per share and adjusted distributable earnings of $0.26 per share [9] - The overall net interest margin increased by 20 basis points to 5.27, supported by a growing capital allocation to CLOs [9] - The economic return for the quarter was negative 3.2%, with book value per share at $6.08 [10][11] Business Line Data and Key Metrics Changes - The CLO portfolio increased by 46% to $250 million, while capital allocated to CLOs expanded to 81% from 72% at the end of the previous quarter [11] - The agency RMBS holdings decreased slightly to $504 million from $512 million at the end of the previous quarter [11] - The portfolio P&L by strategy showed a negative $0.24 per share from CLOs and a positive $0.08 from agency [10] Market Data and Key Metrics Changes - The market experienced strong performance in January and February, followed by turbulence in March due to fears of tariffs, slowing growth, and persistent inflation [7] - Credit spreads widened significantly in March, impacting CLO mezzanine debt and equity tranches, leading to meaningful price declines [7][8] - Recent tariff de-escalations have led to credit spreads and prices reversing course in May, recovering a significant portion of the declines [8] Company Strategy and Development Direction - The company successfully completed its conversion to a registered closed-end fund and changed its fiscal calendar to begin on April 1 [4][5] - The strategy focuses on increasing the CLO portfolio while maintaining liquidity and flexibility in response to market conditions [22][29] - The company plans to add corporate debt to its liability structure later this year, which should be accretive to net investment income [29] Management's Comments on Operating Environment and Future Outlook - Management noted that while there were mark-to-market losses in calendar Q1, most price declines were driven by credit spread widening rather than realized credit losses [22] - The company is optimistic about deploying capital in a compelling market and believes it is well-positioned to drive strong earnings moving forward [29] - Management expects to be slightly short on dividend coverage in the second quarter but is on track for recovery in the third quarter [56] Other Important Information - The company disposed of all remaining mortgage positions shortly after April 1, which allowed for increased liquidity and buying power [8][25] - As of April 30, approximately 18.8% of the total portfolio, or about $59 million, was in cash and cash equivalents, providing ample dry powder for deployment [27] Q&A Session Summary Question: How does the yield on newly acquired CLOs compare to the previous $250 million? - Management indicated that the weighted average yield varied from slightly wider to potentially hundreds of basis points back, depending on the type of assets purchased [34] Question: Is there still dry powder available for deployment? - Management confirmed that there is still good dry powder available and that cash reserves are maintained to allow for increased portfolio size [37][39] Question: What are the latest thoughts on the ADE trajectory? - Management stated that they might be slightly short on covering the dividend in the second quarter but are on track for recovery in the third quarter [56]