1. Report Industry Investment Rating No information about the industry investment rating is provided in the given content. 2. Core Viewpoints of the Report - The supply of secondary and perpetual bonds (二永债) is expected to moderately increase in April, breaking the issuance silence since the beginning of the year. The supply is driven by banks' capital - supplementing needs, the demand to meet the Total Loss - Absorbing Capacity (TLAC) gap, and the renewal of expiring bonds. The urgency for state - owned banks to issue secondary and perpetual bonds to supplement capital has been structurally alleviated, and the net supply of state - owned banks' secondary and perpetual bonds in 2026 is expected to remain at a low level [1][19]. - In March, the yields of credit bonds decreased overall. The long - end performance was weaker than the short - end, and the credit spreads widened passively. In April, the credit bond market is expected to show a pattern of "warming demand and moderately increasing supply", which is beneficial for credit bond performance, and the spreads are expected to compress [2]. - For investment strategies, short - term credit bonds can be used as a coupon base, and the duration can be appropriately extended to 4 - 5 years. Institutions with stable liabilities can appropriately allocate ultra - long - term credit bonds of about 7 years. Attention can be paid to the opportunity of excess spread compression of 3 - 5Y medium - and high - grade bank secondary and perpetual bonds [2][40]. 3. Summary According to the Directory 3.1 How to View the Subsequent Supply of Secondary and Perpetual Bonds? 3.1.1 Bank Capital Tool Regulatory Approval Feature Summary - The regulatory approval quota is mainly for national and joint - stock banks, with 2023 being the peak year. Since 2024, the approval quota for secondary and perpetual bonds has declined. The proportion of approval quotas for state - owned banks has decreased in the past two years, while that of joint - stock banks and city commercial banks has increased [11]. - The regulatory approval time has seasonal characteristics. In the past two years, it has been concentrated in Q2 and Q4. Q1 is the off - season for approvals, and the quota proportion is mostly less than 10% [13]. - State - owned banks have a fast first - issuance rhythm after approval but issue in multiple batches. Small and medium - sized banks tend to use most of the approved quota at once [18]. 3.1.2 Outlook for the Subsequent Supply of Secondary and Perpetual Bonds - As of the end of March 2026, the effective approval quota for commercial bank capital tools is 189.79 billion yuan, with 71.41 billion yuan already used. State - owned banks have the most remaining quota [19]. - In April, the supply of secondary and perpetual bonds is expected to moderately increase. On one hand, the capital - supplementing urgency of state - owned banks has been alleviated. On the other hand, the redemption and renewal demand for secondary and perpetual bonds in Q2 is nearly 30 billion yuan, with state - owned and joint - stock banks accounting for 79% [19][20]. 3.2 Review and Outlook of the Credit Bond Market in March - In March, the yields of credit bonds decreased overall. The long - end performance was weaker than the short - end, and the credit spreads widened passively. The yields of most credit bonds decreased, with short - term bonds having a larger decline [24][27]. - The scale of wealth management products decreased, and the net - breaking rate increased. As of the end of March, the full - caliber wealth management scale decreased to 31.14 trillion yuan, and the net - breaking rates of all bank wealth management products and wealth management subsidiaries increased [30]. - In April, the credit bond market is expected to show a pattern of "warming demand and moderately increasing supply", which is beneficial for credit bond performance, and the spreads are expected to compress. Short - term credit bonds can be used as a coupon base, and the duration can be appropriately extended to 4 - 5 years [37][40]. 3.3 Primary Market 3.3.1 Issuance Volume - In March 2026, the issuance scale and net financing scale of credit bonds increased both year - on - year and month - on - month. The issuance scale was 1.6271 trillion yuan, and the net financing was 349.6 billion yuan. The net financing of urban investment bonds was 50.3 billion yuan, and that of industrial bonds and financial bonds was 374.8 billion yuan and - 75.5 billion yuan respectively [44]. 3.3.2 Issuance Term - The average issuance term of credit bonds lengthened month - on - month. From March 1st to March 27th, the average issuance term was 3 years, an increase of 0.23 years compared with February. The average issuance terms of urban investment bonds, industrial bonds, and financial bonds all increased [46]. 3.3.3 Issuance Cost - The average issuance cost of credit bonds decreased month - on - month. From March 1st to March 27th, the average issuance interest rate was 2.07%, a decrease of 2bp compared with February. The average issuance interest rate of urban investment bonds decreased by 5bp, that of industrial bonds remained flat, and that of financial bonds increased by 2bp [49]. 3.3.4 Cancellation of Issuance - In March, the number and scale of cancelled credit bond issuances increased month - on - month. A total of 40 credit bonds were cancelled, with a total scale of 2.1985 billion yuan [52]. 3.4 Secondary Market 3.4.1 Trading Volume - In March, the trading volumes of all types of credit bonds increased month - on - month. Urban investment bonds had the largest increase in trading volume, followed by industrial bonds. The trading terms and implicit ratings of different types of bonds also changed [58]. 3.4.2 Trading Liquidity - In March, the turnover rates of urban investment bonds, industrial bonds, and financial bonds all increased. The turnover rates of all terms of urban investment bonds and industrial bonds increased, and for financial bonds, the turnover rate of the 5 - 7 - year term increased the most [60]. 3.4.3 Spread Tracking - In March, the spreads of urban investment bonds showed different trends. Only the spreads of 3 - year AA(2) - rated, 7 - year all - rated, and 10 - year medium - and low - rated bonds narrowed, while the spreads of other terms widened. The spreads of most AAA - rated and AA - rated industrial bonds widened. The spreads of most bank secondary and perpetual bonds, as well as those of securities and insurance sub - bonds, widened, with the ultra - long - end performing better [66][71][73]. 3.5 Hot Bonds in March - According to the bond liquidity scores, the top 20 urban investment bonds, industrial bonds, and financial bonds in terms of liquidity scores are selected for investors' reference [77]. 3.6 Credit Rating Adjustment Review - In March, the bond ratings of 4 bonds were upgraded, and there was no downgrade [83].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In April, the buying power of credit bonds may increase, and it is advisable to attack appropriately. One can layout curve convex points, dig into the spreads of perpetual bonds to increase returns, and pay attention to the relatively high cost - performance of 2Y and 4Y secondary perpetual bonds while being aware of the large - scale redemption risk of fixed - income plus products [1][4]. - The yields of urban investment bonds generally declined, with short - duration and medium - low - rated bonds performing better [42]. - The supply of industrial bonds increased, and the proportion of medium - and long - term issuances rose [56]. - The net financing of bank secondary perpetual bonds was negative, and most spreads widened passively [64]. 3. Summary by Directory 3.1 4月信用债买盘力量或上升，适当进攻 3.1.1 布局凸点、挖掘永续品种利差增厚收益 - In March, the bond market showed a structural market of "narrow - range fluctuations in long - term interest rates, short - term strength and long - term weakness, and a steeper curve". The yields of credit bonds generally declined, and the credit spreads of most within - 5 - year bonds widened passively, while those of 7 - year and 10 - year bonds narrowed [9]. - The incremental demand for credit bond allocation in March mainly came from funds and other products, with the duration concentrated within 3 years [10]. - As of March 27, the yields and credit spreads of credit bonds were generally low, and the carry - trade space of medium - and short - duration credit bonds was significantly compressed [11]. - In April, the bond market may remain volatile. The increase in the scale of wealth management products may drive up the demand for credit bond allocation. One can layout curve convex points to increase returns through riding and dig into the spreads of perpetual bonds [15]. - For medium - and short - duration bonds, urban investment bonds with AA rating for 2 - year and 4 - year terms and AA(2) rating for 2 - 3 - year terms have relatively high cost - performance. High - rated 6 - 7Y bonds are convex points, and one can play with small positions in 5 - 7 - year bonds with an implied rating of AA+ and above [18][21]. - As of March 27, the outstanding scale of public perpetual bonds was 3.53 trillion yuan, and there is still room to dig into the spreads of perpetual bonds. One can actively dig into the spreads of perpetual bonds and wait for the spread compression market [23]. 3.1.2 二永债2Y和4Y性价比较高，关注固收+大额赎回风险 - In March, the yields of secondary perpetual bonds generally declined, and the credit spreads mostly widened passively. The 2 - 3 - year bonds performed weaker. The cost - performance of 2Y and 4Y secondary perpetual bonds has recovered [27]. - The divergence in institutional behavior has increased. Funds "chased up and sold down". The demand for secondary perpetual bonds from wealth management products was relatively stable, and insurance and other institutions have been net buyers in the secondary market in recent weeks [28]. - In April, the buying power of credit bonds is strong, and high - coupon assets may be favored. The 2Y and 4Y secondary perpetual bonds have relatively high cost - performance. However, one needs to be vigilant against the risk of secondary perpetual bond adjustment caused by the redemption of fixed - income plus products [32][35]. 3.2 城投债：收益率普遍下行，短久期、中低评级表现更好 - In March, the net financing of urban investment bonds was positive and increased year - on - year. The proportion of medium - and long - term issuances increased, and the weighted average issuance interest rates generally declined [42]. - The net financing performance of urban investment bonds varied by province, with about two - thirds of the provinces having positive net financing [44]. - In March, the yields of urban investment bonds generally declined, with short - duration and medium - low - rated bonds performing better. The credit spreads showed differentiation [46]. - The buying sentiment of urban investment bonds continued to pick up in March. The proportion of TKN and low - valuation transactions increased slightly compared with February. The trading activity of medium - and long - term bonds and medium - and low - grade bonds increased [53]. 3.3 产业债：供给放量，中长久期发行占比增加 - In March, the issuance and net financing scale of industrial bonds increased significantly year - on - year. The proportion of medium - and long - term issuances increased, and the issuance interest rates of medium - and short - duration bonds declined [56]. - In March, the yields of industrial bonds declined across the board, with medium - and short - duration and low - grade bonds performing better. The credit spreads showed differentiation [58]. - The yields of public bonds in various industries declined by 7 - 17bp. The 2 - year - and - within bonds and 2 - 3 - year AA bonds performed better [61]. 3.4 银行二永债：净融资为负，利差大多被动走扩 - Since 2026, there has been no new issuance of secondary perpetual bonds. In March, the secondary capital bonds and perpetual bonds were redeemed by 284 billion yuan and 397 billion yuan respectively, with a total net financing of - 681 billion yuan, a year - on - year decrease of 727 billion yuan [64]. - In March, the yields of bank secondary perpetual bonds generally declined, with short - duration and low - rated bonds performing better. Most credit spreads widened passively, and some bonds outperformed or underperformed general credit bonds [66]. - From the perspective of broker transactions, in March, the proportion of TKN transactions in secondary capital bonds and perpetual bonds remained basically the same, and the proportion of low - valuation transactions slightly decreased. The trading of large - bank secondary capital bonds extended the duration, while that of large - bank perpetual bonds shortened the duration. The trading sentiment of city - commercial bank secondary perpetual bonds improved [71].

Group 1 - The overall investment demand for credit bonds in April is expected to remain strong, with over 2 trillion yuan needing allocation [5][8] - The average net growth of wealth management products in April is projected to be 2.06 trillion yuan, following a seasonal increase [5][8] - Insurance premium income in April typically shows seasonal reduction, with an average premium income of approximately 352.6 billion yuan [5][9] Group 2 - April is historically a month of high issuance for credit bonds, with an average issuance of 1.4132 trillion yuan and a repayment amount of 1.1007 trillion yuan [21][22] - The expected net financing scale for April is around 205.2 billion yuan, leading to an anticipated issuance of 1.6836 trillion yuan in credit bonds [21][22] - Financial bonds may see concentrated supply in April, potentially creating trading opportunities in the primary and secondary markets [29] Group 3 - In March, funds were the absolute net buyers of 1-3 year credit bonds, with a net purchase of 801 billion yuan in this category [30][31] - The strategy for April recommends prioritizing the allocation of medium to short-term bonds, particularly those with a maturity of 3 years or less [42][43] - The yield for 5-year credit bonds has adjusted down to around 1.9%, indicating potential trading opportunities [42][43]

Group 1 - The report discusses the current market's focus on the direction of the bond market amid a tug-of-war between bullish and bearish sentiments, emphasizing the need to monitor factors beyond inflation that could exceed expectations [1][7] - Key factors influencing the bond market include the recovery strength and sustainability of the macroeconomic fundamentals, which are seen as the core contradictions to watch in the next phase [4][9] - The steepening of the yield curve is attributed to a shift in long-term macro narratives, with a focus on the transition from old to new economic drivers and the easing of credit contraction pressures [10][12] Group 2 - The report suggests that the bond market environment in the first half of 2026 will differ from that of 2025, with limited downward space for bond yields and potential upward risks requiring new catalysts [16] - Investment strategies for credit bonds should focus on the 3-year maturity range, with a cautious approach to duration while seeking opportunities in the upcoming credit market [19][21] - The report highlights the anticipated recovery of perpetual bonds issuance in the second quarter, with manageable pressure expected, particularly in the context of the evolving demand dynamics [23][24] Group 3 - The report identifies the next observation window for the growth of credit bond ETFs as potentially occurring in April-May, driven by market conditions and the recent regulatory changes in the technology innovation bond sector [25][26] - The recent decline in the convertible bond market is linked to external shocks and a risk-averse approach by investors, leading to significant reductions in positions [27][28] - Future pricing logic in the convertible bond market will increasingly depend on how equities are priced in response to external shocks, with a focus on potential mispricing opportunities relative to equities [29]

Group 1: Key Insights on Bond Market Dynamics - The bond market needs to focus on macroeconomic fundamentals' recovery strength and sustainability, which may become the core contradiction in the next phase [12][13] - The yield curve steepening is a correction of the long-term macro narrative, with a shift from a flat yield curve to a steep one since 2025, influenced by factors such as stock market rebounds and easing credit contraction [14][15] - The central bank's monetary policy in 2026 is expected to prioritize smooth transmission of monetary policy rather than just lowering policy rates, which will likely maintain a steep yield curve [15][16] Group 2: Market Sentiment and Investment Strategies - The current environment indicates that the bond market's bullish space may be limited, but further corrections require new catalysts, with upcoming economic and financial data in Q2 being a key focus [17][21] - Institutions are advised to lower duration in their bond investments, focusing on medium to short-term credit bonds and more certain coupon strategies, as the risk-reward ratio for long-duration assets is asymmetric [21][25] - The investment in short-term credit bonds is currently crowded, but there may be opportunities in the 3-5 year credit bonds as demand may increase in Q2 [25][27] Group 3: Specific Opportunities in Credit Bonds - Attention should be given to 3-year credit bonds, particularly those rated AA and above, as well as opportunities in 3-5 year credit bonds due to potential demand increases [27][28] - The issuance of perpetual bonds is expected to resume in Q2, but the pressure remains manageable, with a focus on liquidity and supply-demand dynamics [29][30] - The upcoming window for observing growth in credit bond ETF scales is anticipated around April-May, driven by potential market conditions [31][33] Group 4: Convertible Bonds Market Analysis - The recent significant decline in the convertible bond market is attributed to external shocks and investors reducing positions to manage downside risks [34] - The microstructure of the convertible bond market may stabilize if stop-loss and profit-taking pressures are alleviated [35] - Future pricing logic in the convertible bond market will increasingly depend on how equities are priced in response to external shocks [36]

1. Report's Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - The bond market continued its volatile recovery, with medium - to long - term credit bonds performing strongly, and credit spreads showed different trends across various bond types [2][3] - Credit bond yields declined following interest rates, and medium - and long - term credit spreads compressed [3][10] - Most urban investment bond spreads decreased by 1 - 2BP, while spreads of private and mixed - ownership real - estate industrial bonds continued to widen [4][15] - Most yields of secondary and perpetual bonds declined, and medium - to long - term varieties performed strongly [4][33] - The excess spreads of industrial perpetual bonds increased slightly, while those of urban investment perpetual bonds remained generally stable [5][35] 3. Summary by Relevant Catalog 3.1 Credit Bond Yields Follow Interest Rates Down, and Medium - and Long - Term Credit Spreads Compress - From March 23 to March 27, bond interest rates declined slightly overall. The yields of 1Y, 3Y, 5Y, and 10Y China Development Bank bonds decreased by 1BP, while the 7Y yield increased by 1BP [10] - Credit bond yields generally declined following interest rates. Bonds with a term of over 3Y performed strongly. For 1Y bonds, yields of AA and above grades decreased by 0 - 1BP, while the AA - grade yield increased by 3BP. Similar trends were observed for other terms [10] - Medium - and long - term credit spreads compressed, with different trends for different grades and terms. Rating spreads and term spreads also showed various changes [10] 3.2 Most Urban Investment Bond Spreads Decrease by 1 - 2BP - For external ratings, spreads of AAA and AA + grade urban investment platforms were mostly flat or decreased by 1 - 2BP compared to last week. Some regions had specific changes, such as a 3BP decrease in Liaoning and Inner Mongolia for AAA platforms [15] - AA - grade platform spreads mostly decreased by 1 - 3BP, with specific regional differences [15] - By administrative level, spreads of provincial, prefecture - level, and district - level platforms generally decreased by 1 - 2BP, with some regions showing larger changes [19] 3.3 Most Industrial Bond Spreads Decrease, while Spreads of Private and Mixed - Ownership Real - Estate Bonds Continue to Widen - Central and state - owned enterprise real - estate bond spreads decreased by 1 - 3BP, private real - estate bond spreads increased by 3BP, and mixed - ownership real - estate bond spreads increased by 51BP [25] - Spreads of coal bonds of AAA, AA +, and AA grades decreased by 2BP, 1BP, and 5BP respectively. Spreads of AAA - grade steel bonds decreased by 1BP, and AA + remained flat. Spreads of AAA and AA + grade chemical bonds both decreased by 1BP [25] 3.4 Most Yields of Secondary and Perpetual Bonds Decline, and Medium - to Long - Term Varieties Perform Strongly - For 1Y secondary and perpetual bonds, yields decreased by 0 - 1BP, and spreads were mostly flat or increased by 1BP. For other terms, yields and spreads showed different trends, with medium - to long - term yields generally decreasing and spreads compressing [33] 3.5 Excess Spreads of Industrial Perpetual Bonds Increase Slightly, while Those of Urban Investment Perpetual Bonds Remain Generally Stable - The excess spread of industrial AAA - grade 3Y perpetual bonds increased by 0.52BP to 9.48BP, reaching the 15.55% quantile since 2015. The excess spread of industrial 5Y perpetual bonds increased by 0.01BP to 13.21BP, reaching the 36.24% quantile [35] - The excess spread of urban investment AAA - grade 3Y perpetual bonds decreased by 0.05BP to 7.01BP, reaching the 15.77% quantile. The excess spread of urban investment 5Y perpetual bonds increased by 0.29BP to 10.93BP, reaching the 21.64% quantile [35] 3.6 Credit Spread Database Compilation Instructions - Market - wide credit spreads, commercial bank secondary and perpetual spreads, and urban investment/industrial perpetual bond credit spreads are calculated based on ChinaBond medium - and short - term note and ChinaBond perpetual bond data, with historical quantiles starting from the beginning of 2015 [37] - Urban investment and industrial bond - related credit spreads are compiled and statistically analyzed by the Huafu Securities Research Institute, with historical quantiles starting from the beginning of 2015 [37] - The calculation methods for individual bond credit spreads, bank secondary capital bond/perpetual bond excess spreads, and industrial/urban investment perpetual bond excess spreads are provided, along with sample screening criteria [39]

Investment Rating - The industry investment rating is "Overweight" (maintained) [1] Core Insights - The report highlights a potential adjustment in the management rules for interbank certificates of deposit (CDs) in 2026, which may reflect a three-tier regulatory approach aimed at controlling both the total amount and structure of funding [3][4] - It suggests that the focus of liabilities is shifting towards core deposits, with interbank CDs transitioning from a tool for active leverage to one for liquidity management [3] - The anticipated impact includes a contraction in the scale of interbank CDs and an increase in the issuance share of perpetual bonds by state-owned banks [5] - The report indicates that banks may face short-term supply shocks in interbank CDs, but there remains potential for interest rate declines throughout the year [6] Summary by Sections Regulatory Changes - The management rules for interbank CDs may be adjusted, potentially leading to a unified management approach with financial bonds, aimed at preventing banks from excessively leveraging through interbank CDs [3] - The regulatory intent is to mitigate liquidity and interest rate risks by encouraging banks to replace short-term interbank CDs with more stable long-term liabilities [4] Market Impact - The issuance of interbank CDs is expected to shrink, particularly affecting smaller regional banks that have relied heavily on these instruments for liquidity management [5] - The issuance strategy may shift from a one-time annual registration to a more dynamic, demand-driven approach, increasing uncertainty in market supply and potentially leading to interest rate volatility [5] Investment Recommendations - The report recommends focusing on city commercial banks with ample project reserves and high regional economic vitality, such as Jiangsu Bank, Hangzhou Bank, and Chongqing Bank [7] - In the medium to long term, large comprehensive banks and specialized wealth management banks are expected to perform better, with recommendations for banks like China CITIC Bank, Agricultural Bank of China, Industrial and Commercial Bank of China, and China Merchants Bank [7]

1. Report Industry Investment Rating No information about the industry investment rating is provided in the content. 2. Core Viewpoints of the Report - This week (March 16 - March 20), the bond market's interest rate curve became steeper, with the medium - short end being stronger and the long end being weaker and volatile. The spread of short - duration and weak - quality bonds compressed, and the spread of Tier 2 capital bonds slightly converged. The 10Y - 1Y and 30Y - 10Y treasury bond spreads reached 57BP and 56BP respectively, at a high level in recent years [2][10]. - The central bank's downplaying of the interest rate cut expectation restricts the long - end trend market, while the short - end has advanced under the expectation of loose funds and inter - bank self - discipline, but there may be fluctuations later, and the probability of a significant increase is limited. The current state of long - short end segmentation will not last forever, and there are potential breaking points in the market [2][4]. 3. Summary According to the Directory 3.1 Central Bank's Downplaying of Interest Rate Cut Expectation Restricts the Long - End Trend Market - Since January, the long - end interest rate recovery was mainly driven by large - scale allocation funds. The central bank tilted towards stabilizing growth at the beginning of the year, but inflation risks have not been eliminated, and non - bank institutions are hesitant [10]. - After the recent sharp rise in oil prices, the market has started to price in future inflation paths in advance. In both optimistic and pessimistic scenarios, PPI is expected to return to around 0 or turn positive in March, with the high point around June. The high point of CPI year - on - year will appear in May - June, and in the pessimistic scenario, the high point may approach 2.5% [14]. - The central bank has downplayed the expectation of interest rate cuts since March. It emphasizes the balance between various goals and no longer mentions that the alleviation of bank interest margin pressure creates space for interest rate cuts. In the recent meeting, it only mentioned guiding and regulating the interest rate level according to economic and financial situations, which may be related to inflation uncertainty [15][19]. - The economic data from January to February exceeded market expectations, but the data improvement was affected by multiple factors. The overall high growth of the data in January - February relieved the pressure on GDP growth to maintain 4.5% in Q1, which may make the central bank tend to wait and see, resulting in a lack of a long - end trend market [21][23]. 3.2 Short - End Races Ahead under Loose Funds and Inter - bank Self - Discipline Expectations, with Limited Probability of a Significant Increase in the Future - Despite the central bank's downplaying of interest rate cut expectations, the liquidity remains abundant. The current state may be affected by cash return and fiscal fund replenishment. It is estimated that the excess reserve ratio in March is expected to reach 1.4% [25][28]. - The stable DR001 may be related to the central bank's maintenance of stability. Although the central bank has downplayed the interest rate cut expectation, it also maintains a loose liquidity environment to avoid short - term market impacts [29]. - The current short - end interest rate has largely priced in the expectation of loose funds after the quarter - end. The probability of the short - end interest rate center moving further down is relatively limited, and there may be disturbances if the funds do not become looser or fluctuate after the quarter - end [34][36]. 3.3 Potential Breaking Points of the Long - Short End Segmentation State - In the medium - term, the long - short end segmentation state will not last. There are several potential breaking points: fundamental improvement leading to the central bank tightening liquidity and flattening the curve bearishly, but the current risk is relatively limited; supply shocks affecting the domestic economy and overseas demand, with the impact possibly appearing in mid - April; the central bank advancing the reserve requirement ratio cut due to A - share adjustments, which may bring more opportunities for the long - end, with a higher probability of implementation in Q2 [37][40][46]. - In the short - term, the bond market may continue to fluctuate. Before the quarter - end, the state of uncertain inflation paths and loose funds may continue. Some investors may turn to the middle part of the curve. Recently, 5Y and 7Y interest - rate bonds have performed relatively strongly, and 4 - 5Y Tier 2 capital bonds may still benefit in the short - term [47].

Group 1: Report Overview - The report focuses on the institutional behavior analysis and trading signal mining of secondary and perpetual bonds (Er Yong bonds) [5] Group 2: Investment Highlights - Three trading signals for Er Yong bonds are constructed: the overbought and oversold signals of public - offering funds, the "expectation" signal of 10Y Er Yong bonds, and the entry signal of allocation - oriented investors [7][8] - The performance of Er Yong bonds has an inverse relationship with the stock market, and the liability situation of fixed - income plus funds affects the pricing of Er Yong bonds [9] Group 3: Er Yong Bonds - Features and Advantages - Er Yong bonds refer to secondary capital bonds and perpetual bonds issued by commercial banks. They are important debt instruments for banks to meet capital adequacy ratio requirements. They have become a popular choice with both liquidity and high coupon rates, attracting institutional funds [14] - Compared with interest - rate bonds, Er Yong bonds amplify market trends, with spreads narrowing in bull markets and widening in bear markets [16] Group 4: Current Characteristics of Er Yong Bonds 4.1 Correlation Study by Institution - In the secondary market, the main trading counterparties of Er Yong bonds are banks, funds, wealth - management firms, securities firms, insurance companies, and others. Public - offering funds have the highest pricing power, and insurance companies act as stabilizers [19] 4.2 Overbought and Oversold Signals of Funds - Overbought and oversold signals of public - offering funds are constructed using moving averages and standard deviations. The win - rates are 70% and 64% respectively from 2024 to 2026. The overbought signal has better cumulative returns [20][21][26] 4.3 10 - Year Er Yong Bonds as an Indicator of Interest Rate Expectations - Public - offering funds' increased allocation of 10 - year secondary capital bonds usually occurs in the middle to late stages of a bull market. A decline in net purchases may indicate a market reversal [31] 4.4 Entry Signals of Allocation - Oriented Investors - When interest rates are in a downward trend and insurance companies are buying Er Yong bonds, it may indicate a positive signal. The win - rate of this signal is about 74% from 2024 to 2026 [36][39] Group 5: Correlation between Er Yong Bonds and the Stock Market - There is a negative correlation between Er Yong bonds and the stock market. An increase in the scale of fixed - income plus products can lead to a strengthening of Er Yong bonds [40]

1. Report Industry Investment Rating - No information about the industry investment rating is provided in the report. 2. Core Viewpoints of the Report - The long - and short - ends of the credit bond market are expected to "go their separate ways" and this situation may continue. Future long - term interest rates are unlikely to decline, while short - term interest rates are unlikely to rise. Credit bond short - ends are expected to continue to benefit, and although the spread protection is thin, it is also difficult to widen. In April, the support effect of wealth management's bond - allocation demand will soon appear. It is recommended to maintain the strategy of sinking the short - end of urban investment bonds and continue to earn the interest rate spread. Due to the redemption of fixed - income + products caused by the stock market adjustment, the selling pressure of secondary perpetual bonds has increased. Since no new secondary perpetual bonds have been issued this year, the impact of future concentrated supply needs to be prevented. Considering the performance of long - term interest rates, there are no obvious opportunities in the short term, and it is recommended to wait for the right - side layout [7][10]. 3. Summary According to Relevant Catalogs 3.1 Credit Bond Weekly Viewpoint - The Middle East situation last week significantly disturbed the equity market, and the bond market also fluctuated. In the first half, it took the opportunity to recover, and in the second half, it evolved into a situation of both stocks and bonds falling. In the future, inflation expectations and cross - quarter funding conditions should be mainly concerned. It is judged that long - term interest rates are difficult to decline and short - term interest rates are difficult to rise. Credit bond short - ends will continue to benefit, and it is recommended to maintain the short - end sinking strategy of urban investment bonds and continue to earn the interest rate spread. Secondary perpetual bonds face increased selling pressure, and there are no obvious short - term opportunities. It is recommended to wait for the right - side layout [7][10]. 3.2 Credit Bond Weekly Review 3.2.1 Negative Information Monitoring - There were no bond defaults or overdue events, no enterprises with their main body ratings or outlooks downgraded, and no bonds with their debt ratings downgraded from March 16th to March 22nd, 2026. However, on March 19th, S&P adjusted the rating outlook of China Jinmao Holdings Group Co., Ltd. from "stable" to "negative" and confirmed its "BBB -" long - term issuer credit rating. There were also several major negative events involving companies such as Sichuan Blu-ray Development Co., Ltd., Sunac Real Estate Group Co., Ltd., etc. [13][14]. 3.2.2 Primary Issuance - The primary issuance scale of credit bonds last week reached the highest value this year, with the repayment amount increasing simultaneously, and the net financing amount remained flat compared to the previous week. From March 16th to March 22nd, 2026, the primary issuance of credit bonds was 397.8 billion yuan, and the total repayment amount was 306.4 billion yuan, with a net inflow of 91.4 billion yuan. Four bonds were cancelled or postponed for issuance. The financing cost of high - grade bonds increased significantly, while that of medium - and low - grade bonds decreased. The average coupon rates of AAA and AA+ grades were 2.05% and 2.15% respectively, with a month - on - month increase of 12bp and a decrease of 7bp [15][16]. 3.2.3 Secondary Trading - The valuations of short - and medium - term credit bonds of all grades generally decreased by 2bp, while those of long - term bonds remained flat. The risk - free interest rates all decreased, resulting in the credit spreads of short - and medium - term bonds remaining flat or narrowing slightly and those of long - term bonds widening. The 3Y - 1Y term spreads of all grades remained flat, while the 5Y - 1Y term spreads widened comprehensively, especially the 5Y - 1Y spreads, which mostly widened by 2bp. The AA - AAA grade spreads remained flat or narrowed slightly, with the short - and medium - term spreads narrowing by 1 - 2bp except for the 5Y spread. The average credit spreads of urban investment bonds in each province narrowed by 1bp last week, with Inner Mongolia and Ningxia having a relatively large narrowing of 3bp. The spreads of industrial bonds in each industry remained flat or narrowed, similar to those of urban investment bonds. The weekly turnover rate increased by 0.23 percentage points to 1.97%. The issuers of bonds with a turnover rate in the top ten were mostly central and state - owned enterprises. The issuers of credit bonds with a discount of more than 10% in trading last week mainly involved Vanke. Among individual entities, the urban investment entities with the largest narrowing or widening of spreads were scattered, and among industrial entities, the top five entities with the largest widening of spreads were mostly real estate enterprises, including Rongqiao, Vanke, Greenland, and Xinyuan [18][20][25].