Quantitative Models and Construction Methods 1. Model Name: Multi-Cycle Timing Model for Domestic Interest Rates - **Model Construction Idea**: The model uses kernel regression algorithms to identify the support and resistance lines of interest rate trends. It evaluates the breakthrough patterns of interest rate movements across different investment cycles to provide multi-cycle composite timing signals[9][21]. - **Model Construction Process**: 1. **Data Input**: Yield-to-Maturity (YTM) data for 5-year, 10-year, and 30-year government bonds is used as the basis for analysis[9][21]. 2. **Cycle Definition**: - Long cycle: Monthly frequency - Medium cycle: Bi-weekly frequency - Short cycle: Weekly frequency[9][21]. 3. **Signal Generation**: - For each cycle, the model identifies upward or downward breakthroughs in interest rate trends. - A composite score is calculated based on the number of consistent signals across the three cycles. If at least two out of three cycles show the same directional breakthrough, a timing signal is generated[9][21]. 4. **Final Signal**: - The final signal is classified as "neutral," "neutral oscillation," or "neutral with a slight upward/downward bias" based on the composite score[9][21]. - **Model Evaluation**: The model effectively captures interest rate trends and provides actionable timing signals for different bond maturities[9][21]. 2. Model Name: Multi-Cycle Timing Model for U.S. Interest Rates - **Model Construction Idea**: The domestic multi-cycle timing model is applied to the U.S. Treasury market to generate timing signals for U.S. interest rates[18]. - **Model Construction Process**: 1. **Data Input**: 10-year U.S. Treasury YTM data is used as the basis for analysis[18]. 2. **Cycle Definition**: - Long cycle: Monthly frequency - Medium cycle: Bi-weekly frequency - Short cycle: Weekly frequency[18]. 3. **Signal Generation**: - The model identifies upward or downward breakthroughs in interest rate trends for each cycle. - A composite score is calculated based on the number of consistent signals across the three cycles. If at least two out of three cycles show the same directional breakthrough, a timing signal is generated[18]. 4. **Final Signal**: - The final signal is classified as "neutral" or "neutral oscillation" based on the composite score[18]. - **Model Evaluation**: The model demonstrates adaptability to the U.S. market, providing consistent timing signals for U.S. Treasury yields[18]. --- Model Backtesting Results 1. Multi-Cycle Timing Model for Domestic Interest Rates - **5-Year YTM**: - Long-term annualized return: 5.47% - Maximum drawdown: 2.88% - Return-to-drawdown ratio: 1.9 - Short-term annualized return (since 2024): 2.1% - Maximum drawdown: 0.59% - Return-to-drawdown ratio: 3.57 - Long-term excess return: 1.06% - Short-term excess return: 0.77%[22][34] - **10-Year YTM**: - Long-term annualized return: 6.04% - Maximum drawdown: 2.74% - Return-to-drawdown ratio: 2.21 - Short-term annualized return (since 2024): 2.33% - Maximum drawdown: 0.58% - Return-to-drawdown ratio: 4.03 - Long-term excess return: 1.63% - Short-term excess return: 1.19%[25][34] - **30-Year YTM**: - Long-term annualized return: 7.32% - Maximum drawdown: 4.27% - Return-to-drawdown ratio: 1.71 - Short-term annualized return (since 2024): 2.95% - Maximum drawdown: 0.92% - Return-to-drawdown ratio: 3.22 - Long-term excess return: 2.42% - Short-term excess return: 2.65%[30][34] 2. Multi-Cycle Timing Model for U.S. Interest Rates - **10-Year YTM**: - Final signal: Neutral oscillation - Composite score: 1 upward breakthrough in the short cycle, no signals in the long and medium cycles[18][20] --- Quantitative Factors and Construction Methods 1. Factor Name: Interest Rate Structure Indicators (Level, Term, Convexity) - **Factor Construction Idea**: The factor set quantifies the structural characteristics of the interest rate market, including level, term, and convexity, to provide insights into market positioning and mean-reversion tendencies[6]. - **Factor Construction Process**: 1. **Level Structure**: - Definition: Average YTM across maturities - Current value: 1.58% - Historical percentiles: 18% (3 years), 11% (5 years), 5% (10 years)[6]. 2. **Term Structure**: - Definition: Slope of the yield curve - Current value: 0.55% - Historical percentiles: 50% (3 years), 34% (5 years), 40% (10 years)[6]. 3. **Convexity Structure**: - Definition: Curvature of the yield curve - Current value: 0.06% - Historical percentiles: 41% (3 years), 25% (5 years), 21% (10 years)[6]. - **Factor Evaluation**: These factors provide a comprehensive view of the interest rate market's structural dynamics, aiding in timing and allocation decisions[6]. --- Factor Backtesting Results 1. Interest Rate Structure Indicators - **Level Structure**: Current value: 1.58%, historical percentiles: 18% (3 years), 11% (5 years), 5% (10 years)[6] - **Term Structure**: Current value: 0.55%, historical percentiles: 50% (3 years), 34% (5 years), 40% (10 years)[6] - **Convexity Structure**: Current value: 0.06%, historical percentiles: 41% (3 years), 25% (5 years), 21% (10 years)[6]

Core Viewpoint - The bond market weakened in the last week before the holiday, with government bond rates rising while credit bonds strengthened. The expectation is for a recovery in the bond market post-holiday due to regulatory changes and easing bank pressure [1][7]. Group 1: Market Performance - In the last week before the holiday, the 10-year and 30-year government bond rates increased by 1.0bps and 4.4bps to 1.85% and 2.27%, respectively, while short-term rates also rose [1][7]. - Credit bonds showed strength, with 3-year and 5-year AAA secondary capital bond rates slightly declining, and the 1-year AAA certificate of deposit rate decreasing by 1.0bps to 1.63% [1][7]. Group 2: Regulatory Changes - The new public fund fee regulations, which are more lenient than the draft proposal, are expected to alleviate redemption pressure and support the bond market recovery. The final version allows for certain exemptions on redemption fees for long-term holders [1][7]. Group 3: Bank Pressure and Supply - The easing of bank indicator pressures, particularly from large banks, is anticipated to enhance overall allocation strength in the bond market. The Basel framework adjustment will reduce the parallel shift limit from 250bps to 225bps, effective January 1, 2026 [2][9]. - The government bond issuance plan for the first quarter is set at 2.1 trillion, lower than the 2.5 trillion planned for the same period in 2025, but with an accelerated issuance schedule [9][10]. Group 4: Credit and Funding Dynamics - The concentration of credit issuance in January is expected to impact the bond market. The proportion of first-quarter credit issuance has increased from 36.2% in 2020 to an estimated 59.8% in 2025, with January alone potentially accounting for 35% of annual credit [10][14]. - Despite the anticipated surge in credit issuance, current credit demand remains low, indicating that the impact on the bond market may be more rhythmical rather than trend-based [14][15]. Group 5: Future Outlook - The bond market is expected to recover post-holiday, with smoother recovery anticipated after late January, despite ongoing supply pressures and increased funding demands [15]. - The expectation is that the 10-year government bond may reach new lows in the first half of the year [15].

超长债偏弱运行的三重压力 岁末阶段，收益率曲线整体沿陡峭化路径运行，与我们此前提示一致。在长端整体承压的背景下，超长期限调整幅度 更为突出。这反映出超长端的三重压力正在被广泛预期和集中定价： 供给压力不小，而流动性红利近尾声。从发行、存量与成交期限三个维度进行国际比较可见，当前国内政府债融资和 存量期限结构与美国较为相似。而若与德日对比，尤其是在低利率环境与跨周期资金需求的双重推动下，仍不排除有 进一步向长期限结构演变的空间。然而，与融资期限的长期化相比，超长债流动性的提升可能已接近瓶颈。国内超长 债交易活跃度已显著高于海外成熟市场，进一步扩张空间受限。这些潜在变化方向，对超长债利差构成向上压力。 对融资成本的政策导向从"推动下降"转向"低位运行"，从比价角度制约超长端利率下行空间。央行措辞变化反映 出，社会融资成本或已处于政策合意的低位水平。而过去五年间，30 年期国债利率累计下行约 146BP，与企业贷款利 率 147BP 的降幅基本持平。比价维度看，超长端利率脱离比价关系而下行的动力显著降低。 需求格局存在挑战。当前市场对久期边际偏好减弱、负债端对波动容忍度下降，机构对超长债的承接力弱化。对 30- 1 ...

Core Viewpoint - The 2025 Chinese government bond market has undergone deep calibration amid frequent macro narratives and intense long-short logic battles, characterized by record supply and a proactive issuance pace in the primary market, effectively supporting active fiscal policies while the secondary market experienced a narrow range of fluctuations in the 10-year bond yield, which gradually shifted downward throughout the year [1][13]. Group 1: Primary Market Dynamics - In 2025, the primary market for government bonds achieved a historic leap under the theme of "active fiscal policy moderately strengthened, quality improved," with notable features including increased supply scale, scientifically advanced issuance pace, and continuous optimization of maturity structure [2][15]. - The total issuance of government bonds reached a historic high of 16,014.02 billion yuan, a significant increase of 28.37% compared to 12,474.83 billion yuan in 2024, with 206 bonds issued throughout the year [2][15]. - The issuance of special bonds focused on long-term funding for national strategic security areas and key projects, with the issuance of ultra-long special bonds reaching 1.3 trillion yuan, expected to significantly boost annual GDP growth [5][19]. Group 2: Interest Rate Trends - The overall issuance interest rates of government bonds declined, effectively guiding the financing costs across society. The short-term interest rates (1-3 years) ranged from 1.16% to 1.79%, while the 10-year bond issuance rate stabilized around 1.78% [6][19]. - The systematic decline in issuance costs of government bonds, as a risk-free rate anchor, directly contributed to the reduction of comprehensive financing costs in the bond market and the real economy, achieving efficient unity between fiscal sustainability and financial benefits to the real sector [6][19]. Group 3: Secondary Market Developments - The secondary market for government bonds in 2025 was characterized by complex dynamics, with the 10-year bond yield fluctuating between approximately 1.6% and 1.9%, undergoing a "four-round game" of expectations that ultimately established a new oscillating equilibrium [7][21]. - The first round saw a rapid correction of overly optimistic expectations regarding monetary easing, with yields rebounding nearly 40 basis points by mid-March [9][21]. - The fourth round featured a key institutional benefit with the central bank's announcement to restart government bond trading operations, which was interpreted as a significant step in enhancing liquidity management tools and stabilizing long-term expectations [10][22]. Group 4: Strategic Role of Government Bonds - The evolution of the government bond market in 2025 transcended mere financing and trading, extending its functions to monetary policy operations, financial openness, and the construction of the national credit system [11][23]. - The "stabilizer" and "attractiveness" roles of RMB assets have strengthened, with foreign investors steadily increasing their holdings, leading to broader inclusion of government bonds in major global bond indices [11][23]. - The modernization of government bond management, including the incorporation of bond trading into the central bank's regular monetary policy toolbox, marks a significant milestone in establishing a modern central banking system [11][23]. Group 5: Future Outlook - The government bond market is expected to continue evolving under the overarching theme of "high-quality development," balancing necessary government financing, reducing debt costs, and maintaining financial system stability [12][24]. - As market depth, product innovation, and institutional openness progress, the yield curve of government bonds will increasingly serve as a benchmark for asset pricing across society [12][24]. - Market participants will need to shift from merely chasing interest rate trends to developing a deeper understanding of macro logic, seizing structural opportunities, and effectively managing interest rate risks to succeed in the new balanced market [12][24].

Core Viewpoint - The bond market is expected to exhibit structural differentiation between interest rate bonds and credit bonds in 2026, influenced by a complex interplay of monetary policy and economic recovery factors [1][3][5]. Group 1: Market Trends - In Q4 2025, the interest rate bond market showed a recovery trend after a bearish adjustment in Q3, with the 10-year government bond yield fluctuating between 1.7% and 1.85% [1]. - The credit bond market experienced increased transaction volumes but widening credit spreads, indicating a divergence from interest rate bonds [1][2]. - The issuance scale of credit bonds decreased, with corporate bonds showing zero issuance, reflecting a weak overall supply willingness despite some positive growth in company bonds and medium-term notes [2]. Group 2: Influencing Factors - Positive factors for the bond market include a moderately loose monetary policy, which may support market performance, especially if the U.S. further lowers interest rates [3]. - Negative factors include rising inflation pressures, easing "asset scarcity," and changes in supply structure, which could impact market sentiment and demand [4]. - The overall bond market in 2026 is expected to experience wide fluctuations with a moderate upward trend, particularly in the interest rate bond sector [5]. Group 3: Investment Strategies - Investment strategies should focus on short-term opportunities in interest rate bonds while avoiding duration risks, particularly in the first quarter of 2026 [6]. - Credit bond investments should target structural opportunities, emphasizing coupon strategies, with a focus on high-grade short-duration credit bonds to mitigate risks [6][7]. - The expansion of technology innovation bonds is anticipated to reshape credit bond allocation strategies, with a recommended approach of combining short-term coupons with mid-to-long-term timing [7].

Domestic Macro - Demand Side - During the New Year holiday, consumer demand for travel and cinema surged, with retail sales of passenger cars showing a narrowing year-on-year decline of 19.5%[1] - In December 2025, the external demand showed an increase in volume but a decrease in price, with the Baltic Dry Index (BDI) at 2315.2, reflecting a 5.1% increase[1] Domestic Macro - Production Side - The PMI and high-frequency data showed a divergence, with the PMI at 50.1% in December 2025, indicating no significant improvement in physical workload[1] - The production impact of the late Spring Festival in 2026 was minimal, with the production index showing a 3.42 percentage point increase compared to November 2025[1] Price Performance - CPI showed fluctuations in pork prices and a continuous rise in fruit prices, with a 0.43% increase noted[2] - PPI indicated a weakening in crude oil prices while non-ferrous metal prices showed volatility, with WTI at 1.77%[2] Fiscal Policy - In January 2026, local government bond issuance plans are set at 580 billion, reflecting a 104.4% increase compared to the previous year[2] Monetary and Liquidity Conditions - The yield curve for government bonds has shifted upward, with the SHIBOR 007 rate at 1.9560%, up by 51 basis points[2] Global Macro - Global financial market activity has cooled due to the New Year holiday, impacting trading volumes[2]

Group 1: Domestic News - President Xi Jinping emphasized the need for more proactive macro policies to achieve qualitative and effective economic growth and reasonable quantitative growth, aiming for a good start to the 14th Five-Year Plan in 2026 [2] - Xi also highlighted the importance of focusing on the real economy and further deepening reforms, placing new quality productivity development in a more prominent strategic position [2] - The National Bureau of Statistics reported that the manufacturing PMI for December was 50.1%, up 0.9 percentage points from the previous month, indicating expansion [3] Group 2: Financial Market Developments - The China Securities Regulatory Commission (CSRC) announced the implementation of the third phase of fee rate reform for public funds, which is expected to reduce the comprehensive fee rate by approximately 20%, saving investors about 51 billion yuan annually [3] - The CSRC also launched a pilot program for commercial real estate investment trusts (REITs) to enhance the market structure and increase the supply of quality REITs [4] - The People's Bank of China conducted a 7-day reverse repurchase operation of 528.8 billion yuan at a fixed rate of 1.40%, resulting in a net fund injection of 502.8 billion yuan for the day [10][11] Group 3: Bond Market Dynamics - The bond market saw a total issuance of 70,179.3 billion yuan in various bonds in November, with local government bonds accounting for 9,126.9 billion yuan [6] - The secondary market for credit bonds experienced significant price deviations, with some industrial bonds seeing price changes exceeding 10% [15] - The market for convertible bonds showed mixed performance, with the China Convertible Bond Index and the Shanghai Composite Convertible Bond Index both experiencing slight fluctuations [29] Group 4: International News - In the U.S., initial jobless claims fell to 199,000, close to historical lows, indicating a resilient labor market despite year-end fluctuations [8] - The U.S. Treasury yields rose across various maturities, with the 10-year yield increasing by 4 basis points to 4.18% [32] - In Europe, the 10-year government bond yields showed mixed trends, with Germany's yield rising by 1 basis point to 2.86%, while yields in Spain and the UK declined [35]

Report Industry Investment Rating No relevant content provided. Core View - Short-term negative factors are repaired, but medium-term structural optimization is not yet complete. The new regulations on fund fees have a positive impact on the bond market in the short term, and the sentiment in the bond market is expected to recover. Medium and long-term credit bonds and Tier 2 capital bonds are expected to benefit, while the benefits for short-term bond funds are limited, and bond ETFs may expand in scale but shorten in duration. [1][3][9] Summary by Directory 1. Redemption Fee Regulations Change: Partial Exemption for Bond and Index Funds, Transition Period Extended to 12 Months - On December 31, 2025, the China Securities Regulatory Commission revised and issued the "Regulations on the Administration of Sales Fees of Publicly Offered Securities Investment Funds," which came into effect on January 1, 2026. Compared with the draft for comments, the official version gives partial exemption for the redemption fees of bond funds and index funds. For individual investors who hold index funds and bond funds for 7 days or more, and institutional investors who hold bond funds for 30 days or more, fund managers can negotiate the redemption fee standards separately. The transition period for adjusting non-compliant existing funds is set to 12 months, which is more lenient and eases potential market disruptions. [7] 2. Impact of the New Redemption Regulations on the Bond Market: Short-term Negative Factors Repaired, Medium-term Structural Optimization Incomplete 2.1 Short-term Benefits: Uncertainty of the Impact of the New Regulations on the Bond Market Resolved, Market Sentiment Expected to Recover - The new regulations were implemented in a more moderate way, significantly reducing the short-term passive redemption pressure on bond funds and providing support for the bond market at the liability end. If the central bank accelerates treasury bond trading and insurance funds enter the market for allocation in the future, ultra-long bonds will be supported to some extent, and certificate of deposit rates are expected to decline slowly. [9] 2.2 Medium and Long-term Credit Bonds/Tier 2 Capital Bonds Benefit: More Obvious Repair of Liability End Stability - The enhanced stability of the liability end of bond funds is beneficial to medium and high-grade medium and long-term, highly liquid credit bonds and Tier 2 capital bonds. After the new regulations, the benefits to the liability end are more obvious compared to interest rate bonds and short-term credit bonds, and the spreads caused by previous fluctuations are expected to recover. [10] 2.3 Limited Benefits for Short-term Bond Funds, Bond ETFs May Expand in Scale but Shorten in Duration - The exemption threshold for institutional investors of short-term bond funds has been raised from 7 days to 30 days, weakening their liquidity advantage. Funds may flow to money market funds or bond ETFs. However, the current characteristics of the ETF market, such as "expanding scale, shortening duration, and concentrating on the short end," may continue, and long-duration credit bond/Science and Technology Innovation Bond ETFs may face more instability. [11] 3. Weekly Data Overview of Bond Funds - The ETF market shows the characteristics of "shortening duration and concentrating on the short end." The PCF duration of various ETFs generally shortens slowly. At the same time, the scale of medium and short-term varieties has expanded, and funds have gradually flowed into short-term treasury bond and credit bond varieties. The overall trading volume in the market has decreased in the past week, and trading activity has converged. [12]

Group 1: Bond Market Overview - In November, the total issuance of various bonds in the bond market reached 70,179.3 billion yuan, with government bonds at 10,444.2 billion yuan, local government bonds at 9,126.9 billion yuan, financial bonds at 11,955.0 billion yuan, corporate credit bonds at 13,948.8 billion yuan, credit asset-backed securities at 327.2 billion yuan, and interbank certificates of deposit at 24,009.2 billion yuan [1] - By the end of November, the bond market's custody balance was 196.3 trillion yuan, indicating a robust market size [1] - The interbank bond market saw a total transaction volume of 30.5 trillion yuan in November, with an average daily transaction of 1.5 trillion yuan, reflecting a year-on-year increase of 7.6% and a month-on-month increase of 3.2% [1] Group 2: Foreign Participation and Market Trends - As of the end of November, the custody balance of foreign institutions in the Chinese bond market was 3.6 trillion yuan, accounting for 1.9% of the total custody balance [1] - In the interbank money market, the total transaction volume in November was 74 trillion yuan, showing a year-on-year decrease of 17.3% but a month-on-month increase of 9.6% [2] - The weighted average interest rate for interbank lending in November was 1.42%, reflecting a month-on-month increase of 2.5 basis points, while the weighted average interest rate for pledged repos was 1.44%, with a month-on-month increase of 3.2 basis points [2]

Group 1: Bond Market Overview - In November, the bond market issued a total of 70,179.3 billion yuan across various types of bonds [1] - The breakdown of bond issuance includes: 10,444.2 billion yuan in government bonds, 9,126.9 billion yuan in local government bonds, 11,955.0 billion yuan in financial bonds, 13,948.8 billion yuan in corporate credit bonds, 327.2 billion yuan in asset-backed securities, and 24,009.2 billion yuan in interbank certificates of deposit [1] - As of the end of November, the total custody balance of the bond market reached 196.3 trillion yuan [1] Group 2: Trading Activity - In November, the interbank bond market recorded a total transaction volume of 30.5 trillion yuan, with an average daily transaction of 1.5 trillion yuan, reflecting a year-on-year increase of 7.6% and a month-on-month increase of 3.2% [1] - The custody balance of foreign institutions in the Chinese bond market was 3.6 trillion yuan by the end of November, accounting for 1.9% of the total custody balance [1] Group 3: Money Market Overview - In November, the interbank lending market had a transaction volume of 7.4 trillion yuan, showing a year-on-year decrease of 17.3% but a month-on-month increase of 9.6% [2] - The bond repurchase transaction volume was 149.8 trillion yuan, with a year-on-year decrease of 6.8% and a month-on-month increase of 13.9% [2] - The weighted average interest rate for interbank lending was 1.42%, which increased by 2.5 basis points month-on-month, while the weighted average interest rate for pledged repos was 1.44%, increasing by 3.2 basis points month-on-month [2]