1. Report Industry Investment Rating - No relevant content provided in the given report. 2. Core Viewpoints of the Report - The report focuses on the main characteristics of bond ETF premiums and discounts and their impact on component bonds. It analyzes the influence mechanism of bond ETF premiums and discounts on component bonds, the characteristics and influencing factors of premiums and discounts, the volume - price changes of component bonds during premium and discount periods, and provides corresponding conclusions and insights [8][61]. 3. Summary According to Relevant Catalogs 3.1 Bond ETF Premium and Discount Impact Mechanism on Component Bonds - The premium - discount rate is used to measure the deviation between the bond ETF price and the net value. In the discount stage, investors redeem shares in the primary market and sell ETFs in the secondary market, leading to a decline in the ETF price and net value. Arbitrage behavior can repair the discount to some extent. In the premium stage, investors subscribe for shares in the primary market and buy ETFs in the secondary market, causing the ETF price and net value to rise, and arbitrage can repair the premium. Different redemption mechanisms (physical redemption and cash redemption) have different impacts on ETFs [9][10][12]. 3.2 Characteristics and Influencing Factors of Bond ETF Premiums and Discounts 3.2.1 When Do Premiums and Discounts Occur? - Local - government bond ETFs had continuous deep discounts from 2022 - 2023, mainly due to low trading activity. Since 2024, they have maintained a slight premium. Credit - type ETFs had discounts from September 2022 to April 2023 and in the second half of 2025, and slight premiums in 2024 and the second quarter of 2025. The physical redemption mode often has a deeper discount than the cash redemption mode [17][20][21]. 3.2.2 How Do Turnover, Share, and Net Value Change During Premium and Discount Stages? - Turnover: In the deep - discount stage, turnover is prone to peak, but the correlation has weakened since 2025 [28][29][40]. - Share: There is synchronicity between short - term deep discounts and share redemptions [33][34][36]. - Net Value: In the deep - discount stage, the ETF net value often recovers before the price [38]. - Summary: In the deep - discount stage, the underlying asset liquidity of the ETF is extremely restricted. Turnover is prone to peak, but it does not necessarily correspond to continuous large - scale redemptions. Since 2025, the correlation between the premium - discount rate and turnover, share, and net - value changes has weakened [40]. 3.3 Volume - Price Change Characteristics of ETF Component Bonds During Premium and Discount Stages 3.3.1 Volume: Trading Activity - The trading activity is measured by the ratio of the number of bonds with transactions to the number of bonds without transactions. The trading activity of component bonds in different indexes responds differently to ETF premiums and discounts. The urban investment index shows an anti - intuitive phenomenon, while the Shanghai and Shenzhen market - making indexes conform to the theoretical mechanism [43][44][46]. 3.3.2 Price: Credit Spread - The credit spread is measured by the difference between the bond's yield to maturity and the yield of the same - term China Development Bank bond. In the deep - discount stage of the urban investment index, the credit spread of non - component bonds widens more significantly. In the Shanghai and Shenzhen market - making indexes, the credit spread of component bonds widens significantly during premium and discount periods, indicating higher price - discovery efficiency [53][54][56]. 3.4 Main Conclusions and Insights - In the deep - discount stage, the underlying asset liquidity is restricted, and large - scale redemptions often occur during short - term discounts in the continuous premium stage. Different indexes have different response patterns to ETF premiums and discounts. When selecting bonds in the discount stage, it is necessary to judge the source of the discount. The lack of liquidity in the credit - bond market is a major constraint, and bond ETFs should improve market efficiency and provide protection during market adjustments [62][63].

Summary of Conference Call Notes Industry Overview - The focus is on the credit bond market, particularly the dynamics of corporate bonds and the impact of regulatory changes on investment strategies in 2025 and 2026 [1][4][9]. Key Points and Arguments Credit Market Performance in 2025 - The credit market is expected to show a stair-step resistance to declines, with short-term credit bonds outperforming interest rate bonds [2]. - The yield curve for both interest rates and credit has undergone a reshaping process, with secondary perpetual bonds steepening significantly, approximately 10 basis points higher than medium-term notes [2]. - The market can be segmented into phases, with notable trends including a tightening of funds at the beginning of the year, stabilization in late March to early April, and a significant demand for technology innovation ETFs from May to July [2]. Supply and Demand Dynamics - Net financing for credit bonds in 2025 is projected to exceed 3 trillion yuan, primarily driven by state-owned enterprise (SOE) bonds, while local government bonds are expected to continue a trend of reduced issuance, estimated at around 200 billion yuan [1][4]. - SOEs are showing clear signals of increasing leverage, with private enterprises experiencing a shift from negative to positive financing for the first time since 2021 [1][4][6]. - The demand side is dominated by wealth management products and funds, although the proportion of credit assets held by wealth management has decreased, leading to a slight decline in absolute holdings [1][4]. Outlook for 2026 - The credit bond market in 2026 is anticipated to face challenges, with both supply and demand expected to weaken, but the degree of supply weakening is not expected to match that of demand [5]. - The incremental issuance of local government bonds is expected to be minimal, around 200 to 300 billion yuan, which can be considered negligible [5]. - SOEs are expected to continue increasing leverage, indicating ongoing demand for financing [6]. Financial Bonds and Regulatory Impact - The supply of financial bonds, including Tier 2 capital bonds, is expected to be weaker in 2026 compared to 2025, primarily due to the regulatory timeline for TLAC compliance, which has a two-year buffer [7]. - The issuance of secondary perpetual bonds is projected to be low, with no significant hard issuance demand anticipated [8]. Impact of Redemption Regulations - New redemption regulations may lead to significant redemptions of short-term bond funds held by institutions, particularly affecting wealth management products that hold approximately 6 to 7 trillion yuan in pure bond funds [3][9]. - The net asset value management will shift wealth management products towards lower volatility assets, reducing the demand for long-duration credit bonds [10]. Investment Recommendations - It is advised to focus on medium to long-term credit assets with maturities of 3 to 5 years, while waiting for market adjustments before engaging in long-end bond trading opportunities [11]. Additional Important Insights - The overall market environment for 2026 is expected to be more challenging, with potential structural reshaping in the credit market [5]. - The performance of long-duration bonds, particularly secondary perpetual bonds, may be adversely affected due to reduced demand from institutional investors like insurance companies [11].