Group 1 - The report emphasizes the importance of nominal growth, with expectations for a moderate increase in nominal GDP growth to around 5.3% in Q2, influenced by high oil prices and a stable inflation index [4][34][35] - Export performance is projected to show some short-term slowdown, but medium-term resilience is expected due to China's industrial chain advantages, which may help offset the impact of high oil prices on external demand [4][17][21] - The real estate market is characterized by a "small spring" effect, where volume increases are driven by price reductions, but the foundation for stabilization remains uncertain, particularly in April [4][22][27] Group 2 - Monetary conditions indicate limited probability for broad monetary easing, with banks potentially shifting their liability structures, leading to a stable funding environment [4][10][11] - The supply-demand dynamics in the bond market are improving, with manageable supply pressures and increased non-bank institutional participation, which is expected to enhance the overall market conditions [4][13][18] - The report suggests that Q2 typically presents a favorable environment for asset management products, indicating a good window for achieving higher portfolio returns [4][5][22] Group 3 - The bond market strategy focuses on maintaining a safety cushion in a "money-rich" environment, emphasizing small-scale trading opportunities and the exploration of excess yield spreads [4][6][7] - The report anticipates that the 10-year government bond yield will fluctuate between 1.75% and 1.85%, while the 30-year bond yield may see core fluctuations around 40-50 basis points [4][7][11] - Attention is drawn to the potential for yield compression and structural opportunities in the bond market, particularly with the expected increase in asset management product sizes in April [4][6][7]

1. Report Industry Investment Rating No information provided in the given content. 2. Core Viewpoints of the Report - The traditional credit bond investment strategy centered on "holding to maturity" has gradually become ineffective. Trading to increase returns or reduce drawdowns has become an important approach. "Valuation elasticity" is crucial in different market environments, and the report focuses on measuring the valuation elasticity of credit entities to guide investment decisions [8][9]. - High - elasticity entities show strong offensiveness in the yield - downward stage but perform poorly in the yield - upward stage. Low - elasticity entities are the opposite, showing certain resistance to decline in the yield - upward stage. Medium - elasticity entities' performance is generally between the two [3][26]. - Based on the yield performance of high, medium, and low - elasticity credit entities in different stages, credit bond portfolio rebalancing can be carried out according to the 3 - year AA+ medium - short note yield trend. The upper and lower limits of the 10 - year Treasury bond yield can be used to determine the timing of portfolio rebalancing [4][36]. 3. Summary According to the Catalog 3.1 How to Measure the Valuation Elasticity of Credit Entities - The valuation elasticity of each credit entity is measured by the relative fluctuation range of the spread during the "upward" or "downward" stages of the yield. From 2023, the time period is divided into 5 "upward", 6 "downward", and 2 "oscillating" stages based on the 3 - year AA+ medium - short note yield curve [1][10]. - Using non - guaranteed, public bonds in stock on March 13 as samples, calculate the excess spread change amplitude between individual bonds and the same - term, same - implied rating curve in each stage to obtain the average spread change of each credit entity. If the average upward or downward spread change of an entity is in the top 30% of issuers of the same type, it is defined as "high valuation elasticity"; if it is in the bottom 30%, it is "low valuation elasticity"; otherwise, it is "medium valuation elasticity" [1][12]. - If an entity is defined as "high valuation elasticity" at least 6 times and less than 5 times as "low valuation elasticity" in 11 yield upward or downward stages, it is a "high - elasticity entity"; if it is defined as "low valuation elasticity" at least 6 times and less than 5 times as "high valuation elasticity", it is a "low - elasticity entity"; if it is defined as "medium valuation elasticity" at least 6 times and less than 5 times as "high valuation elasticity" or "low valuation elasticity", it is a "medium - elasticity entity". 1149 issuers with non - guaranteed public bonds in stock are screened out, accounting for 39% of all public bond issuers, including 345 high - elasticity entities, 318 low - elasticity entities, and 486 medium - elasticity entities [2][14]. 3.2 Performance of Various Entities in Different Stages - High - elasticity entities show strong offensiveness in the yield - downward stage, with narrowing excess spreads, but perform poorly in the yield - upward stage. For example, during February 3 - August 4, 2023, and December 12, 2023 - August 5, 2024, the excess spreads of high - elasticity entities were significantly compressed by 31bp and 36bp respectively. In the yield - upward stage, they are sold off, and the excess spreads generally widen [26]. - Low - elasticity entities perform mediocrely in the yield - downward stage but show certain resistance to decline in the yield - upward stage. In 6 yield - downward cycles, the excess spreads of low - elasticity entities widened in 5 cycles, underperforming high - and medium - elasticity entities. In 5 adjustment processes, the excess spreads of low - elasticity entities narrowed by 1 - 5bp, showing better resistance to decline [26]. - The performance of medium - elasticity entities is generally between the two. Since August 2024, their yield trends have been basically consistent with the overall trend, and the excess spreads are mostly around 0bp [26]. - In terms of holding - period yields, high - elasticity entities perform better in the bond market yield - downward period, and low - elasticity entities are more resistant to decline in the bond market adjustment period. This characteristic is more obvious for AAA high - grade entities. In 6 yield - downward stages, the holding - period yields of AAA high - elasticity entities are higher than those of low - elasticity entities, while in 5 adjustment cycles, the losses of low - elasticity entities are smaller, and medium - elasticity entities are in between [30]. 3.3 Using the Upper and Lower Limits of the 10 - year Treasury Bond Yield to Determine the Timing of Portfolio Rebalancing - When the yield is at a high level and is expected to decline, increase the allocation of high - elasticity entities to pursue excess returns from spread compression. When the yield is at a low level and is expected to adjust, switch to medium - or low - elasticity entities, which are more resistant to decline than high - elasticity entities and may obtain excess spreads. It is recommended to choose low - elasticity urban investment entities first [36]. - Since 2025, the yield trend of 3 - year AA+ medium - short notes is basically the same as that of the 10 - year Treasury bond but slightly lags behind. Since the third quarter of 2025, the 10 - year Treasury bond yield has been running in a range of 1.75% - 1.9%. The upper and lower limits of the 10 - year Treasury bond yield can be used to determine the timing of portfolio rebalancing. As of March 16, the 10 - year Treasury bond yield is 1.83%, in the middle of the range. Considering that the spread between the 3 - year AA+ medium - short note and the 10 - year Treasury bond has reached a low point, there may be a risk of valuation adjustment for credit bonds. High - elasticity entities can be reduced, and low - or medium - elasticity entities can be increased [4][36][37].

1. Report Industry Investment Rating There is no mention of the industry investment rating in the provided report. 2. Core Viewpoint of the Report - This week (March 9 - March 13), credit bond yields declined, but the repair amplitude was smaller than that of interest - rate bonds, and credit spreads widened passively. The February inflation and January - February import and export data released this week disturbed market expectations. Due to the rebound in February CPI and January - February import and export data, market concerns about inflation pressure increased, and bond market sentiment weakened temporarily. Meanwhile, the overall capital environment was stable, the fluctuation of money market interest rates was limited, which provided a certain buffer for the bond market. The equity market is still in a volatile range, and the overall risk preference has not changed much, so its impact on the bond market is relatively limited [2][11]. - Currently, the yield curve forms a relatively obvious convex point around the 4 - year term. Institutions with relatively stable liability ends can pay attention to the riding value of 4 - year bonds. In the scenario where the yield curve rises by 20BP, 4 - year AA - rated medium - short notes, 4 - year AA and AA(2) - rated urban investment bonds, and 4 - year AAA - and AA + - rated bank perpetual bonds are expected to maintain positive returns or only have small drawdowns during the holding period, with relatively strong anti - volatility ability. For 7 - year urban investment bonds, caution should be exercised, and for 7 - year secondary perpetual bonds, allocation - type funds can choose the opportunity to layout after market adjustments [13][14]. - The issuance of secondary capital bonds and perpetual bonds has obvious seasonal characteristics. Although there is still a high maturity and redemption scale of secondary perpetual bonds this year, and the renewal demand still exists, in the context of the continuous expansion of capital replenishment channels, commercial banks' dependence on secondary perpetual bonds has decreased, and the overall future supply scale may decline [17][18]. 3. Summary According to the Directory 3.1. Focus on Convex Point Riding, and the Supply of Secondary Perpetual Bonds May Decline - Market situation: This week, credit bond yields declined, but the repair amplitude was smaller than that of interest - rate bonds, and credit spreads widened passively. The February inflation and January - February import and export data disturbed market expectations, and bond market sentiment weakened temporarily. The equity market was in a volatile range, and its impact on the bond market was relatively limited [2][11]. - Investment strategy: The current yield curve forms a convex point around the 4 - year term. In the case of a 3 - month holding period and the curve shape remaining unchanged, the holding - period returns of 4 - year bonds are generally higher than those of 5 - year bonds of the same rating. Institutions with relatively stable liability ends can pay attention to their riding value. In the scenario where the yield curve rises by 20BP, 4 - year AA - rated medium - short notes, 4 - year AA and AA(2) - rated urban investment bonds, and 4 - year AAA - and AA + - rated bank perpetual bonds have relatively strong anti - volatility ability. For 7 - year urban investment bonds, caution should be exercised, and for 7 - year secondary perpetual bonds, allocation - type funds can choose the opportunity to layout after market adjustments [13][14]. - Supply situation: The issuance of secondary capital bonds and perpetual bonds has obvious seasonal characteristics. This year, secondary perpetual bonds are still in a peak maturity stage, with an expected annual maturity and redemption scale of about 1.18 trillion yuan, and banks still have a certain renewal demand. However, in the long - term, the net financing scale of secondary perpetual bonds has been declining in recent years. With the diversification of bank capital replenishment channels, the dependence of commercial banks on secondary perpetual bonds has decreased, and the future supply scale may decline [17][18]. 3.2. Review of the Quantity and Price of Inter - bank Liquidity - This week (March 9 - March 13), the volume of the inter - bank pledged repurchase market decreased and the price increased. The median daily trading volume of inter - bank pledged repurchase was 8.51 trillion yuan, a decrease of 260.2 billion yuan from last week, and the trading volume was in the top 2.9% of the range since 2020. The median R001 was 1.39%, an increase of 4bp from last week, and the repurchase interest rate was in the bottom 21% of the range since 2020. The median spread between R001 and DR001 was 6.7bp, a decrease of 0.6bp from last week; the median spread between GC001 and R001 was 11.0bp, an increase of 20.3bp from last week, and the exchange financing cost was higher than that of the inter - bank [38][40]. - In terms of interest rate swaps, the 1 - year FR007 IRS interest rate increased this week. The median 1 - year FR007 IRS was 1.50%, an increase of 2.1bp from last week, and the interest rate was in the bottom 5% of the range since 2020. The median 1 - year SHIBOR 3 - month IRS was 1.56%, and the interest rate was in the bottom 4% of the range since 2020 [43]. 3.3. Review of the Inter - bank Certificate of Deposit Market - On March 13, SHIBOR overnight, 7 - day, 1 - month, 3 - month, 6 - month, 9 - month, and 1 - year quotes were 1.32%, 1.46%, 1.53%, 1.54%, 1.56%, 1.57%, and 1.58% respectively. Compared with March 6, the overnight and above - term quotes changed by 0bp, 5bp, - 1bp, - 1bp, - 1bp, - 1bp, - 1bp respectively. The yields to maturity of 1 - month, 3 - month, 6 - month, 9 - month, and 1 - year inter - bank certificates of deposit of AAA - rated commercial banks were 1.5%, 1.5%, 1.51%, 1.52%, 1.53% respectively. Compared with March 6, the 1 - month and above - term yields changed by 1bp, 0bp, - 1bp, - 1bp, - 2bp respectively [44]. - This week, the total primary issuance volume of inter - bank certificates of deposit was 842.5 billion yuan (excluding those whose actual raised amounts have not been disclosed as of March 13), an increase of 125.2 billion yuan from last week. In terms of issuance terms, the proportions of 6 - month and 9 - month terms increased, while the proportions of 1 - month, 3 - month, and 1 - year terms decreased [48]. - On March 13, the 1 - year FR007 IRS interest rate was 1.50%, an increase of 3.11bp from last week. The yield of 1 - year AAA - rated inter - bank certificates of deposit decreased by 1.75bp from last week, and the spread between the two was 3bp, a narrowing of 5bp from last week [50]. 3.4. Credit Bond Issuance Situation 3.4.1. Issuance Volume and Net Financing - This week (March 9 - March 13), the supply of credit bonds increased both month - on - month and year - on - year. The issuance of credit bonds was 350.333 billion yuan, a month - on - month increase of 18.21% and an increase of 96.211 billion yuan compared with the same period last year. The net financing of credit bonds decreased by 36.707 billion yuan month - on - month and increased by 61.262 billion yuan year - on - year. In terms of types, the net financing of urban investment bonds, industrial bonds, and financial bonds decreased by 43.783 billion yuan, 21.115 billion yuan, and increased by 28.190 billion yuan respectively month - on - month [55]. 3.4.2. Issuance Cost - The average issuance interest rate of credit bonds decreased this week. The average issuance interest rate of credit bonds was 2.81%, a decrease of 6bp from last week. In terms of types, the average issuance interest rates of industrial bonds, urban investment bonds, and financial bonds decreased by 13bp, 6bp, and increased by 2bp respectively month - on - month; in terms of ratings, the average issuance interest rates of AA, AA +, and AAA decreased by 16bp, 2bp, and 11bp respectively month - on - month [66]. 3.4.3. Issuance Term - The average issuance term of credit bonds increased this week. The average issuance term of credit bonds was 2.97 years, an increase of 0.02 years from last week. In terms of types, the issuance terms of industrial bonds, urban investment bonds, and financial bonds increased by 0.29 years, decreased by 0.46 years, and increased by 0.24 years respectively month - on - month [68]. 3.4.4. Cancellation of Issuance - This week, the number of cancelled credit bond issuances was the same as last week, and the scale decreased. A total of 12 credit bonds were cancelled for issuance, the same as last week, and the total cancelled issuance scale was 7.5 billion yuan, a decrease of 0.46 billion yuan from last week [69]. 3.5. Credit Bond Transaction and Valuation Situation 3.5.1. Transaction Volume - This week (March 9 - March 13), the total transaction volume of credit bonds was 1,435 billion yuan, a decrease of 1.3 billion yuan from last week. In terms of categories, commercial bank bonds and non - bank financial bonds in financial bonds traded 455.4 billion yuan and 90 billion yuan respectively. Medium - term notes, short - term financing bills, directional instruments, enterprise bonds, and corporate bonds traded 333 billion yuan, 122.2 billion yuan, 55.4 billion yuan, 18.4 billion yuan, and 360.8 billion yuan respectively. Compared with last week, the trading volumes of various varieties showed mixed trends. The trading volume of urban investment bonds decreased the most, by 15.8 billion yuan. The trading volume of industrial bonds decreased by 10.3 billion yuan, while the trading volumes of bank perpetual bonds and bank secondary capital bonds increased by 7.6 billion yuan and 7.4 billion yuan respectively; the trading volumes of securities firm sub - bonds and insurance sub - bonds decreased slightly by 1.1 billion yuan and 0.3 billion yuan respectively [74]. - In terms of remaining terms, the transaction term structure of urban investment bonds shifted to the medium - long term, the proportion of transactions within 1 year decreased by 4.58pct, while the proportions of 1 - 2 years, 2 - 3 years, 3 - 5 years, and over 5 years increased by 0.83pct, 2.69pct, 0.18pct, and 0.88pct respectively; the term structure of industrial bonds concentrated on 1 - 3 years, the proportion within 1 year decreased by 1.10pct, the proportion of 1 - 2 years increased by 2.93pct, the proportion of 2 - 3 years increased by 0.13pct, the proportion of 3 - 5 years decreased by 1.44pct, and the proportion of over 5 years decreased by 0.51pct; the term structure of bank secondary capital bonds was generally stable, the proportion within 1 year increased by 0.04pct, the proportion of 1 - 2 years decreased by 0.15pct, and the proportion of over 5 years increased by 0.11pct; the term of bank perpetual bonds shifted to the short - end, the proportion within 1 year increased by 3.05pct, the proportion of 1 - 2 years increased by 0.49pct, the proportion of 2 - 3 years increased by 1.72pct, and the proportion of 3 - 5 years decreased by 5.25pct; the term structure of securities firm sub - bonds concentrated on 3 - 5 years, the proportion within 1 year increased by 1.59pct, the proportion of 1 - 2 years decreased by 5.03pct, the proportion of 2 - 3 years decreased by 9.28pct, and the proportion of 3 - 5 years increased by 12.72pct; the term of insurance sub - bonds concentrated on the short - term, the proportion within 1 year increased by 12.94pct, and the proportion of over 5 years decreased by 12.94pct [75]. - In terms of implied ratings, the rating structure of urban investment bonds concentrated on lower ratings, AAA decreased by 0.90pct, AAA - decreased by 0.01pct, AA + remained unchanged (0.00pct), AA increased by 0.14pct, AA(2) decreased by 0.06pct, and AA - increased by 0.85pct; the rating structure of industrial bonds showed differentiation, AAA increased by 1.16pct, AAA - increased by 0.34pct, AA + decreased by 2.02pct, AA increased by 1.13pct, AA(2) decreased by 0.12pct, and AA - increased by 0.12pct; the ratings of bank secondary capital bonds were differentiated, AAA - increased by 4.78pct, AA + decreased by 4.39pct, AA decreased by 0.42pct, and AA - increased by 0.06pct; the ratings of bank perpetual bonds tilted towards AAA -, the proportion of AAA remained unchanged (0.00pct), AAA - increased by 9.07pct, AA + decreased by 7.99pct, AA decreased by 2.40pct, and AA - increased by 1.10pct; the ratings of securities firm sub - bonds concentrated on AA +, AAA - decreased by 8.36pct, AA + increased by 11.03pct, AA decreased by 2.88pct, and AA - increased by 0.14pct; the proportions of various ratings of insurance sub - bonds showed differentiation, AA + increased by 3.55pct, AA increased by 11.64pct, and AA - decreased by 13.17pct [76]. 3.5.2. Spread Tracking - The yields of credit bonds showed differentiation at various levels and terms. This week, except for the yields of 5 - year bonds at all levels, 3 - year and 4 - year AAA - rated bonds, which generally increased, the others generally decreased. Among them, the yields of 1 - year bonds at all levels decreased slightly by 1.73BP. The yield of 5 - year AA - rated bonds decreased the most, by 2.15BP. The current yield percentile levels of all levels are relatively low, the percentiles of the medium - short end are generally lower than those of the long end, the 1 - year AA is at an extremely low percentile of 0.3% since 2025, the 4 - year AA yield percentile is at 24.4%, and the 5 - year AAA is at a percentile of 22.0%. - The credit spreads of 1 - year bonds at all levels, 4 - year AA + and AA - rated bonds narrowed, while the others widened. Among them, the spread of 4 - year AA - rated bonds narrowed the most, by 1.73BP, the narrowing amplitude of 1 - year bonds at all levels was 0.09BP, and the spread of 3 - year AAA - rated bonds widened by 2.48BP. In terms of spread percentiles, the spreads of all levels are generally in a relatively low range, among which the spread percentiles of 1 - year bonds at all levels are relatively low, all between 0.3% - 0.6% [79]. - The yields of urban investment bonds showed differentiation at various levels and terms. The 1 - year yields generally decreased, while the 2 - year, 4 - year, and 5 - year yields generally increased. Among them, the yields of 1 - year bonds at all levels decreased significantly, with AAA decreasing by 1.59BP, and AA + and AA decreasing by 1.58BP. The yields of 5 - year bonds at all levels increased synchronously, with AAA increasing by 0.90BP, AA + increasing by 1.60BP, and AA increasing by 0.6BP. This week, except for the yields of 2 - year, 3 - year AA, 4 - year, and 5 - year bonds at all levels, which increased, the yields of 1 - year bonds at all levels, 3 - year AAA, and 3 - year AA + at all levels decreased, and the short - end decline was relatively significant. The current yield percentile levels of all levels are relatively low, the percentiles of the medium - short term are generally lower than those of the long term, the 1 - year bonds at all levels are at an extremely low percentile of 0.3% since 2025

Group 1 - The report highlights a flattening yield curve in the credit bond market, indicating that the "barbell strategy" may show advantages in this environment [10][24][34] - The liquidity environment remains balanced, with the central bank conducting significant reverse repo and MLF operations, resulting in a net injection of 309.5 billion yuan [10][34] - The report notes that the yield curve for credit bonds has been trending downward and becoming flatter since the beginning of 2026, with various credit bond types showing high-term spreads [11][24] Group 2 - The average issuance rate of credit bonds has decreased to 2.82%, down 12 basis points from the previous week, with specific declines noted in city investment bonds, industrial bonds, and financial bonds [57][58] - The total issuance of credit bonds for the week was 79.46 billion yuan, reflecting a significant decrease compared to both the previous week and the same period last year [46][57] - The average issuance term for credit bonds has dropped to 2.97 years, indicating a trend towards shorter maturities in the current market [60][61] Group 3 - The report indicates a significant drop in trading volume for credit bonds, with total transactions amounting to 693.5 billion yuan, a decrease of 773.6 billion yuan from the previous week [67][68] - The trading structure of city investment bonds has shifted towards shorter maturities, with an increase in the proportion of transactions for bonds with a remaining term of less than one year [68][69] - The report also notes a concentration of higher-rated bonds in the trading structure, particularly for city investment and industrial bonds, suggesting a flight to quality among investors [69]

Key Points - The report indicates that there is still potential for credit spread compression, particularly in the context of different bond types and their excess spreads compared to similar maturity and rating bonds [1][3][35] - As of January 30, 2026, the excess spreads for 3Y AAA-rated bank subordinated bonds, perpetual bonds, and industrial bonds are 6.1BP, 6.6BP, and 11.0BP, respectively, which are at the 92%, 79%, and 44% percentiles since early 2025 [1][3][35] - The report suggests that the selection of bonds based on value for money ranks as follows: bank subordinated bonds > perpetual bonds > urban investment bonds > industrial bonds [1][35] Credit Strategy Review for January 2026 - The yield of bank subordinated bonds has significantly decreased, and the excess spreads remain high, indicating potential for further compression [3][6] - The report notes that the 3Y AA+ urban investment bond yield decreased by 9BP, with the yield at the end of January 2026 being 1.91% [11] - Factors contributing to the decline in credit bond yields include limited corporate financing demand, stable credit issuance, and a loose funding environment [11][14] Performance of Different Credit Strategies - In January 2026, the performance of various credit strategies ranked as follows: duration extension > barbell strategy > 3Y bullet strategy > short-end sinking [15] - The returns for the duration extension strategy for urban investment bonds, industrial bonds, bank subordinated bonds, and perpetual bonds were 0.65%, 0.85%, 0.76%, and 0.82%, respectively [15][18] - The report highlights that the short-end sinking strategy yielded returns of 0.16%-0.19% across different bond types, although its performance was generally average [17][18] Outlook for February 2026 - The report anticipates that the overall funding environment will remain tight, with a weak recovery in the fundamentals [35] - It is expected that the central bank's operations will lead to a decrease in funding rates, potentially resulting in a further decline in long-term bond yields by 5-10BP in Q1 2026 [35] - The report emphasizes that the credit spread compression trend is likely to continue, with a focus on the performance of various bond types [35]

1. Report Industry Investment Rating No information provided in the content. 2. Core View of the Report - Recent bond market fluctuations have slowed, with credit bonds performing slightly better than interest rate bonds, mainly driven by institutional allocation behavior. Banks' asset allocation has shifted from "bond - loan resonance" to "bond - substitution for loan", and credit bonds have become a key focus. Insurance funds are increasing their allocation of medium - and long - term credit bonds due to the dominance of dividend - paying insurance during the "good start" period. The continuous net inflow of funds at the liability end of funds supports the market of credit bonds and Tier 2 capital bonds. It is suggested to focus on 5 - year AA - rated medium - and short - term notes, AAA - and AA + commercial bank perpetual bonds, and explore the structural opportunities of credit bonds [2]. 3. Summary by Relevant Catalog Bank Bond - Loan Allocation: From Resonance to Substitution - Since the beginning of the year, large - scale banks' bond purchases have significantly exceeded market expectations, leading to a decline in the yields of 10 - year and 30 - year Treasury bonds. By reviewing the data from 2023 - 2025, it is found that the substitution effect of bond investment for credit lending in 2025 was more significant than in previous years. The bond - loan allocation behavior of banks can be summarized into three combination models: "strong in both bonds and loans", "weak in both bonds and loans", and "one rising while the other falling". The increase in credit bond allocation by banks has become a key way to make up for the asset gap and rebalance risk and return, and has also stabilized the credit bond market [17][21]. Insurance "Good Start" Funds Drive Credit Bond Allocation - Based on the structural characteristics of insurance premium income in 2025, the incremental demand for insurance funds to allocate credit bonds may continue to increase in 2026, with the "good start" funds being the main driving force. In 2025, the insurance industry's original insurance premium income reached 6.12 trillion yuan, a year - on - year increase of 7.4%. In 2026, dividend - paying insurance products dominated the "good start" sales, which have higher requirements for investment returns and are expected to guide insurance funds to increase their allocation of credit bonds [25]. New Features of Insurance Allocation: The Development of Dividend - Paying Insurance Benefits Medium - and Long - Term Credit Bonds - At the beginning of 2026, insurance funds showed a clear maturity preference for credit bond allocation, with medium - and long - term credit bonds becoming the core of increased allocation. In the first two weeks of January, the net purchase of medium - and long - term credit bonds by insurance institutions accounted for 84% and 94% of the total net purchase of credit bonds. The planned annual increase in holdings of this type of bonds is 39%. This change is mainly driven by the transformation of the liability side. It is expected that the trend of increasing the allocation of medium - and long - term credit bonds by insurance in February 2026 will continue [30]. Tier 2 Capital Bonds: Funds and Insurance Show a Strong Allocation Pattern - Since the beginning of 2026, in the 6 - week period, the market for 3 - to 5 - year Tier 2 capital bonds has shown a pattern of "strong allocation by funds and insurance". Fund companies and products have maintained a high level of buying, with a cumulative net purchase of 759.85 billion yuan. Insurance funds have also strengthened their allocation, with a net purchase of 422.47 billion yuan. The demand for wealth - management products has been stable, with a net purchase of 40.45 billion yuan [37]. Which is Better: Urban Investment Bonds or Industrial Bonds? Based on Historical Price - Ratio Rules - The yields of urban investment bonds and industrial bonds of the same rating and maturity are not completely comparable. Referring to historical price - ratio rules, when the yield of AAA urban investment bonds is about 2bp higher than that of the same - maturity AAA industrial bonds, and when the yield of AA + urban investment bonds is about 2bp lower than that of the same - maturity AA + industrial bonds, it is a better allocation point. Industrial bonds show greater internal differentiation, while urban investment bonds have more convergent pricing. Different rating and maturity bonds have different allocation recommendations based on historical quantiles [40]. Variety Allocation Strategy: Explore Industrial Spreads and Focus on Interest Rate Defense - Considering the current spread quantiles, valuation levels, and market rotation rhythm, the recommended priority for next - week's credit bond allocation is: 5 - year AA - rated medium - and short - term notes > 5 - year AAA - commercial bank perpetual bonds > 5 - year AA + commercial bank perpetual bonds. The main reasons are that the 5 - year AA - rated medium - and short - term notes have obvious allocation value, the 5 - year China Development Bank bonds still have thick spread protection, and the 5 - year AAA - and AA + commercial bank perpetual bonds have room for performance due to the spread compression of medium - and long - term Tier 2 capital bonds [45].

Group 1 - The report highlights that the recent opening of amortized cost bond funds has led to a significant increase in credit bond allocations, with a total opening scale reaching 33 billion yuan, including 8.1 billion yuan for 2-year and 24.9 billion yuan for 5-year funds [1][9] - In the past two weeks, funds have significantly increased their allocation to credit bonds, with net purchases of 62.2 billion yuan from January 12 to January 16 and 105.9 billion yuan from January 19 to January 23, indicating a strong demand for 3-5 year credit bonds [1][9] - The report notes that the 3-5 year short-term bonds have shown outstanding performance, with yields declining by 3-7 basis points and spreads narrowing by 1-6 basis points, particularly highlighting the 4-year AA+ rated bonds which saw a yield drop of 7 basis points [2][10] Group 2 - The report anticipates continued demand for 3-5 year credit bonds in the upcoming weeks, with expected opening scales of 20.7 billion yuan and 22.8 billion yuan, although it cautions that the current spreads are at relatively low levels, limiting further compression [2][10] - The credit strategy suggests that the 4-year bonds have high convexity and should be closely monitored for their allocation value, especially as the amortized cost bond funds enter a concentrated opening period [3][36] - The report emphasizes that the overall sentiment in the bond market is improving, with credit bond yields generally declining and a notable performance in the 3-4 year segment, indicating a potential recovery in market conditions [17][32]

1. Report's Industry Investment Rating - There is no mention of the industry investment rating in the report. 2. Core Viewpoints of the Report - Since mid - July 2025, credit spreads have been in a low - level oscillation pattern. The duration of the low - level credit spreads depends on interest rate trends and liquidity. The shift from low - level oscillation to widening is usually accompanied by rising interest rates and institutional behavior disturbances [15]. - During the low - level oscillation of credit spreads, different varieties perform differently. High - cost - effective varieties favored by institutions have larger compression amplitudes. The amplitude of credit spreads of each variety is not small, especially in longer periods, and the cost - effectiveness can be judged by the position of credit spreads in the oscillation range [23][24]. - In December, institutions still have the willingness to allocate assets in advance for the next year. If interest rates oscillate downward and the capital side is stable, it is conducive to maintaining the low - level oscillation of credit spreads, but the buying power of credit bonds usually weakens, which may restrict the market performance [27]. 3. Summary According to the Directory 3.1 Credit Spreads in the Low - Level Oscillation Period: How to Allocate 3.1.1 Credit Bonds: The Cost - Effectiveness of 3 - Year Varieties Increases - In November, interest rates were in a low - volatility oscillation and rose slightly. Credit bond yields generally increased, with high - rating varieties, 3 - year, and 10 - year bonds performing relatively weakly. Credit spreads showed a differentiated trend, with 1 - year spreads basically unchanged, 3 - year spreads widening by 3 - 6bp, and spreads of AA+ and below 5 - year bonds narrowing by 5 - 8bp [11]. - The buying power of credit bonds weakened from strong to weak in November, and the proportion of transactions within 1 year continued to increase. Funds still had a large net purchase of credit bonds, while the net purchase of credit bonds by wealth management products, other asset management products, and money market funds decreased year - on - year [11][12]. - Since mid - July 2025, credit spreads have shown a low - level oscillation pattern. By reviewing the three previous periods of low - level credit spread oscillation since 2021, three rules were summarized. The duration of low - level credit spreads depends on interest rate trends and liquidity; different varieties perform differently during the low - level oscillation; and the amplitude of credit spreads in the low - level oscillation period is not small, and cost - effective varieties can be judged by their positions [15][23][24]. - In December, institutions still have the willingness to allocate assets in advance, but the decline in interest rates driven by transactions may be less than in previous Decembers due to the new regulations on fund sales fees. If interest rates oscillate downward and the capital side is stable, it is conducive to maintaining the low - level oscillation of credit spreads, but the buying power usually weakens [27]. - Currently, the credit spreads of 3 - year and 10 - year varieties have relatively high cost - effectiveness. It is recommended to control the duration of credit bond allocation and seize structural opportunities. In December, the opening scale of amortizing bond funds is still large, which may boost the demand for 2 - 3 - year credit bonds. For accounts with stable liability ends, they can pre - layout medium - to high - grade 5 - year varieties [32][35]. 3.1.2 Bank Perpetual and Tier - 2 Bonds: Wait for the New Regulations on Fund Sales Fees to be Implemented - In November, the yields of bank perpetual and tier - 2 bonds generally increased, with large - scale banks performing weaker. The spreads of large - scale bank bonds mostly widened, while the spreads of 4 - 5 - year AA - perpetual bonds narrowed. Compared with medium - and short - term notes of the same term, large - scale bank bonds were generally oversold [39]. - Currently, bank perpetual and tier - 2 bonds are waiting for the official release of the new regulations on fund sales fees. The trading sentiment of trading accounts is cautious, but the demand of some allocation accounts has increased. In December, due to the weak buying power of credit bonds and potential valuation fluctuations, accounts with unstable liability ends are advised to participate cautiously, while some accounts with stable liability ends can consider allocating medium - to high - grade varieties [40][44]. 3.2 Urban Investment Bonds: Net Financing Declined Year - on - Year, and Ultra - Long - Term Bonds Performed Well - In November, the net financing of urban investment bonds was positive, but both year - on - year and month - on - month declined. The issuance of medium - and long - term bonds increased, and the weighted average issuance interest rate generally decreased [47]. - The net financing performance of each province was differentiated in November, with about one - third of the provinces having negative net financing. The yields of urban investment bonds showed a differentiated performance, with medium - to high - grade varieties generally increasing and low - grade long - term varieties slightly decreasing [48][50]. - From the perspective of broker transactions, the buying sentiment of urban investment bonds weakened in November, with the TKN ratio and low - valuation ratio both decreasing. The trading of medium - and long - term bonds was active in the first three weeks, and the trading proportion of AA(2) bonds increased slightly [57]. 3.3 Industrial Bonds: Supply Increased Significantly, and the Proportion of Medium - and Long - Term Issuance Rose - In November, the issuance and net financing of industrial bonds increased significantly year - on - year. The issuance of medium - and long - term bonds increased, and the issuance interest rate generally decreased, with a larger decline in the 3 - 5 - year term [60][61]. - The yields of industrial bonds showed a differentiated performance, with medium - to high - grade yields generally increasing and 3 - 5 - year low - grade yields declining against the trend. The spreads of 3 - 5 - year AAA, 3 - year AA+ and AA widened, while the spreads of other varieties mostly narrowed [64]. - The yields of public bonds in various industries generally increased slightly. High - grade medium - and long - term varieties performed weaker, while the 3 - 5 - year AA yields generally declined [67]. 3.4 Bank Perpetual and Tier - 2 Bonds: Supply Increased, and Trading Sentiment Weakened - In November, the supply of bank perpetual and tier - 2 bonds increased significantly, with both issuance and net financing increasing year - on - year. The yields of these bonds generally increased, with large - scale bank medium - and long - term varieties performing weaker. The spreads of large - scale bank bonds mostly widened, and compared with medium - and short - term notes, some varieties performed weakly [70][72]. - From the perspective of broker transactions, the number of transactions of bank perpetual and tier - 2 bonds increased significantly month - on - month, but the trading sentiment weakened. The TKN ratio and low - valuation ratio of secondary capital bonds and perpetual bonds decreased, and the trading of urban commercial bank capital bonds also showed a weakening sentiment, with the trading of urban commercial bank perpetual bonds extending the duration [77].

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report In 2025, the bond market has shifted from a unilateral bull market in 2024 to a continuous wide - range oscillation pattern. Since the third quarter, due to factors such as the "anti - involution" policy, the stock - bond "see - saw" effect, and the fund fee rate new - rule solicitation, the bond market has experienced overall value re - evaluation. Looking forward to the fourth quarter, there are both positive and negative factors in the bond market, and it is expected to show an oscillatory pattern with limited trend - based market opportunities [1][9]. 3. Summary According to the Directory 3.1 Macro - narrative Changes and the Re - evaluation of Bond Assets - **Overall Market Change**: The bond market has shifted from a unilateral bull market in 2024 to a wide - range oscillation pattern. Since the third quarter, influenced by factors like the "anti - involution" policy and the fund fee rate new - rule solicitation, bond market interest rates have fluctuated upwards, and bond assets have undergone comprehensive value re - evaluation. As of October 20, 2025, the yields of 1 - year, 10 - year, and 30 - year treasury bonds have all increased compared to the beginning of the year [9]. - **Deviation from Fundamental and Liquidity**: In the third quarter, the weak fundamentals and loose liquidity could not explain the bond market's fluctuations. The bond market was mainly driven by the "asset re - allocation" logic and the "re - inflation" expectation under the "anti - involution" policy. Regulatory policies also had an impact on the bond market [11]. - **Investor Behavior Change**: Since the third quarter, both residents and institutions have adjusted their asset allocation, reducing the proportion of bond assets and increasing the allocation of equity assets. This has had an impact on the bond market's capital supply [12]. 3.2 "Triple" Re - evaluation of Interest - rate Bonds - **Obvious Interest Rate Callback**: Since the third quarter, affected by policies and regulatory changes, the bond market sentiment has been under pressure, and the yields of long - term and ultra - long - term bonds have increased significantly. As of October 20, 2025, the 10 - year and 30 - year treasury bond yields are at relatively high levels in 2025 [17]. - **Widening of Term Spreads**: The term spreads of 10 - year - 1 - year and 30 - year - 10 - year treasury bonds have widened, and the yield curve has evolved towards a bear - steep state [18]. - **Increase in Variety Spreads**: The 10 - year China Development Bank bond - treasury bond spread has been re - evaluated. Under the influence of the fund fee rate new - rule solicitation, the redemption pressure of bond funds may increase, and the spread between China Development Bank bonds and treasury bonds may widen [23]. 3.3 Differentiation and Remodeling of Credit Spreads - **Relatively Resistant Short - term Credit**: Short - term credit bonds are relatively resistant to decline. The yield increase of medium - and short - term general credit bonds is mostly within 10BP, and the credit spread has slightly narrowed [25]. - **Re - emergence of the "Interest Rate Amplifier" Attribute of Tier 2 and Perpetual Bonds**: The yields of long - term Tier 2 and perpetual bonds have increased significantly, and the current credit spread quantile is above 90% [25]. - **Value Remodeling of Long - term General Credit Bonds**: Under the influence of the fund fee rate new - rule solicitation, the demand for long - term general credit bonds is weak, and the adjustment range of ultra - long - term credit bonds is relatively large [25]. 3.4 High Premium Rate in the Convertible Bond Market - **Overall High Value in the Third Quarter**: In the context of the overall re - evaluation of the bond market, the valuation system of convertible bonds is also being remodeled, and their value in the third quarter is at a relatively high historical level [27]. - **Stable Average Pure Bond Value and Rising Pure Bond Premium Rate**: The pure bond value of the convertible bond market in the third quarter has remained stable, while the pure bond premium rate has risen, indicating that the equity nature of convertible bonds is stronger than the bond nature [27]. - **Increased Average Conversion Value and Relatively High Conversion Premium Rate**: The average conversion value of the whole market has increased, and the conversion premium rate is at a relatively high historical level [28]. 3.5 Tariff Hedging vs. Macro - narrative: Which Will Prevail? - **Fourth - quarter Bond Market Review**: In October, the bond market usually fluctuates greatly, and it is an important window for the introduction of fourth - quarter growth - stabilization and credit - easing policies. From November to December, the bond market usually enters a repair period [38]. - **Positive Factors for the Bond Market**: Tariff disturbances may bring hedging sentiment and easing expectations; the policy effect in the fourth quarter may weaken, and economic growth may slow down; the capital market is balanced and stable, and the central bank's supportive attitude remains; the bond market odds have improved, and the attractiveness to allocation - type funds may increase [3][41]. - **Negative Factors for the Bond Market**: The implementation of the fund sales fee rate reform may trigger redemption and position - adjustment behaviors; the "re - inflation" expectation and macro - narrative changes under the "anti - involution" policy may have a long - term impact on the bond market [3]. - **Outlook for the Bond Market**: In the fourth quarter, the bond market is expected to show an oscillatory pattern with a trading range for the 10 - year treasury bond yield between 1.7% - 1.9%. However, due to various factors, it is difficult to have a trend - based market [48].

1. Report Industry Investment Rating No relevant content provided. 2. Core Views of the Report - After the holiday, the bond market strengthened. With the recent escalation of Sino - US trade frictions, on October 11, interest rates declined, and the long - term bond yields of 10Y and 30Y national bonds fell below 1.75% and 2.10% respectively, increasing the market's long - buying expectations [5][11]. - In the case of tariff war escalation, interest - rate bonds are more cost - effective overall, followed by perpetual secondary bonds. The impact of tariff shocks on the bond market is mostly one - time, presenting mainly trading opportunities. If priced within 2 trading days, the overall benefit is within 5bp [5][11]. - Recent institutional behaviors support a wave of long - buying opportunities for interest rates. Banks are continuously buying bonds on the left side, funds have emptied their ultra - long bond positions, and securities firms are closing their positions, all of which are positive for the bond market [5][12]. - Large banks are extending the duration of their bond investments. Their increased buying of 7 - 10Y national bonds since the end of September reduces the upward space for interest rates [5][12]. - Compared with the tariff shock in April, the current funds are looser. The long - short term spread has opened up the downward space for interest rates. If the central bank's trading of national bonds is implemented, the interest - rate center may decline overall [5][13]. 3. Summary According to Relevant Catalogs 3.1 Trade Frictions and Interest - Rate Opportunities 3.1.1 Opportunities in Interest Rates under Tariff War Escalation - In the tariff war escalation scenario, from an odds perspective, interest - rate bonds are more cost - effective, followed by perpetual secondary bonds. The impact of tariff shocks on the bond market is mainly trading - oriented, and if priced within 2 trading days, the benefit is within 5bp [5][11]. - Institutional behaviors support long - buying opportunities for interest rates. Banks are buying on the left side, funds have "nothing left to sell", and securities firms are closing positions [5][12]. - Large banks are extending the duration of their bond investments, reducing the upward space for interest rates. The current funds are looser, and the long - short term spread has opened up the downward space for interest rates [5][12][13]. 3.1.2 Yield Curve - Compared with September 26, as of October 10, the yields of national bonds and China Development Bank bonds declined overall. For national bonds, the 1Y - 15Y yields mostly declined, while the 30Y yield rose. For China Development Bank bonds, the 1Y - 10Y yields mostly declined, and the 15Y and 30Y yields rose [14][15][16]. 3.1.3 Term Spread - Compared with September 26, as of October 10, the spreads of national bonds (1Y - DR001, 1Y - DR007) increased, and the spreads of China Development Bank bonds showed a differentiated trend. The short - term term spread narrowed, and the long - term spread widened [17]. 3.2 Bond Market Leverage and Funding Situation 3.2.1 Leverage Ratio - From September 29 to October 10, the leverage ratio fluctuated and declined. As of October 10, it dropped to 107.07% [19]. 3.2.2 Repurchase Transaction Volume - From September 29 to October 10, the average daily trading volume of pledged repurchase was 6.3 trillion yuan, with an average daily overnight trading volume accounting for 68.96%. Compared with the week from September 22 to September 26, both the overall volume and the overnight volume decreased [23][24]. 3.2.3 Funding Situation - From September 29 to October 10, the funds lent by banks first decreased and then increased. The net lending of large and policy banks on October 10 was 4.6 trillion yuan, and the net borrowing of joint - stock, city, and rural commercial banks was 0.95 trillion yuan. The main borrowing party was securities firms, and the lending of money market funds fluctuated and increased. DR007 and R007 declined, and 1YFR007 and 5YFR007 first decreased and then increased [27]. 3.3 Duration of Medium - and Long - Term Bond Funds 3.3.1 Median Duration of Bond Funds (Including Leverage) - As of October 10, the median duration of medium - and long - term bond funds (including leverage) dropped to 2.66 years, and the median duration (excluding leverage) was 2.60 years. Both were lower than those on September 26 [40][41]. 3.3.2 Median Duration of Interest - Rate Bond Funds (Including Leverage) - As of October 10, the median duration of interest - rate bond funds (including leverage) dropped to 3.48 years, and the median duration of credit bond funds (including leverage) dropped to 2.39 years. The median durations (excluding leverage) of interest - rate and credit bond funds also decreased compared with September 26 [46]. 3.4 Comparison of Generic Strategies 3.4.1 Sino - US Interest - Rate Spread - As of October 10, the Sino - US interest - rate spread showed a narrowing trend, and the inversion of the spread between the 10Y Chinese national bond and the 10Y US national bond improved [49]. 3.4.2 Implied Tax Rate - As of October 10, the implied tax rate (the spread between China Development Bank bonds and national bonds) generally widened, and the spread between the 10Y China Development Bank bond and the 10Y national bond rose to 19bp [50]. 3.5 Changes in Bond Lending Balances - As of October 10, the bond lending balance of the 10Y national bond 250011.IB recovered, and the bond lending balance of the 30Y national bond 2500002.IB maintained a volatile trend [51].