1. Report Industry Investment Rating No information provided in the text. 2. Core Viewpoints of the Report - The bond market in the second quarter may continue to oscillate and recover. The term spread is expected to gradually decline, and the credit spread may fluctuate at a low level. It is recommended to continue leveraging, selecting rides, and appropriately extending the duration. The 10 - year Treasury bond yield is expected to fall to around 1.6% - 1.7% around the middle of the year [5][36]. 3. Summary by Relevant Catalogs 3.1 March Bond Market: Oscillation, Widened Term Spread, and Narrowed Credit Spread - In March, the long - term bonds oscillated and adjusted. The term spread widened, and the credit spread narrowed. The yields of 10 - year and 30 - year Treasury bonds increased by 4.2bps and 7.9bps respectively to 1.82% and 2.35%. The current 30 - year and 1 - year Treasury bond spread is as high as 113.1bps, and the spread between 30 - year and 10 - year bonds is 53.5bps, almost the highest level since 2023. Except for 3 - year and 5 - year Tier 2 capital bonds, the spreads between other credit bonds and the same - term China Development Bank bonds are basically around or within the 20th percentile since 2023 [1][9]. - The current bond market differentiation and the weak long - term bond situation are the result of multiple factors. Rising prices have led to market concerns about inflation pressure pushing up interest rates, which is more evident in long - term bonds. The short - end is relatively stable due to loose funds. The instability of long - term bonds has led institutions to shorten the duration, and the decrease in inter - bank deposit rates has made wealth management and money market funds increase bond allocation, reducing short - term credit rates [1][9]. 3.2 Fundamentals: Continued Stability with Increased K - shaped Differentiation - The Spring Festival factor has boosted the economic data from January to February to some extent, and the economy has basically remained stable. After excluding the Spring Festival factor, the real recovery momentum of the economic fundamentals has not significantly strengthened. The Spring Festival in 2026 was late, driving up data such as industrial added value and exports. The Spring Festival factor increased exports by 6.1 percentage points. In March, affected by the delayed resumption of work after the festival, relevant economic data may decline [2][13]. - In March, the manufacturing PMI rebounded to 50.4%, returning above the boom - bust line. There is a certain seasonality in the rebound, and the current level is comparable to the seasonal average. The service and construction industry PMIs also rebounded, but their absolute levels are low. Overall, the economy shows a stable trend [17]. - The rise in prices has not effectively translated into investment and financing demand and interest rate - rising pressure. PPI is likely to turn positive in March, but the rise has significant structural characteristics. The PPI of industries related to non - ferrous metals and crude oil has rebounded significantly, while the PPI of mid - and downstream industries is still under pressure. The rebound in PPI has not led to a comprehensive improvement in corporate profits. There is a significant K - shaped differentiation in corporate profits, with only a few industries seeing large profit increases, while the profit growth rates of other industries are still low, resulting in low financing demand [21]. - In April, the financing demand may decline seasonally, which will further widen the bank's asset gap and increase the bond - allocation demand. The issuance of government bonds in April is usually the lowest in a year, and the social financing scale remains low, resulting in insufficient asset supply. On the demand side, the gap between bank deposit growth and loan growth is still large, and the weak loan trend may continue, which will drive banks to increase bond - allocation [23]. 3.3 Short - term Factors Drive the Intensification of Long - Short - end Differentiation, which May Not Last in the Long Run - The recent long - short - end differentiation is mainly due to short - term factors such as inflation sentiment and end - of - quarter bank institutional behavior adjustments, rather than fundamental and capital factors. Inflation itself should not trend - wise push up long - term interest rates. The current long - term bond's greater reaction to prices is inconsistent with historical experience. The current price increase is mainly due to imported factors, which will not increase corporate investment and financing demand and has no trend - wise impact on interest rates [33]. - After the end of the quarter, the bank's bond - allocation power will recover, and combined with loose funds, the market may continue to recover. The previous bond market adjustment before the end of the quarter was mainly related to bank institutional behavior. Banks may sell bonds to realize floating profits at the end of the quarter and adjust their bond - holding structures due to end - of - quarter indicator assessments. After the end of the quarter, the bank's bond - allocation demand is expected to recover, and the short positions of trading institutions will be closed, driving the market to recover [34].

Report Summary 1. Investment Rating The provided text does not mention the industry investment rating. 2. Core View On March 30, the liquidity continued to loosen, with major repo rates declining; the bond market rallied significantly; the convertible bond market corrected following the equity market, with most convertible bond issues falling; yields on U.S. Treasuries across all tenors generally declined, and yields on 10-year government bonds of major European economies also generally declined [1][2]. 3. Summary by Directory 3.1 Bond Market News - **Domestic News** - The Ministry of Finance reported that in 2025, the number of local government financing platforms and the scale of implicit debt decreased significantly. It also strengthened the management of the whole process of replacing existing implicit debt and was "zero-tolerant" of new implicit debt [4]. - The State Administration for Market Regulation required efforts to prevent and control "involution-style" competition in key industries and fields such as platform economy, photovoltaic, lithium batteries, and new energy vehicles [5]. - In 2025, the six major state-owned banks achieved year-on-year growth in both revenue and net profit attributable to shareholders, with a total net profit of 1.42 trillion yuan. Their asset sizes also increased steadily [6]. - **International News** - Fed Chairman Powell's dovish remarks eased market concerns, and traders began to bet on a small probability of a rate cut this year [7]. - **Commodities** - International crude oil futures prices continued to rise, while NYMEX natural gas futures prices turned down. WTI May crude oil futures rose 3.25% to $102.88 per barrel, and Brent May crude oil futures rose 0.18% to $112.78 per barrel. Spot gold rose 0.22% to $4,503.88 per ounce, and NYMEX May natural gas futures prices fell 6.33% to $2.886 per million British thermal units [8]. 3.2 Liquidity - **Open Market Operations** - On March 30, the central bank conducted 269.5 billion yuan of 7-day reverse repurchase operations at a fixed interest rate, with a net injection of 261.5 billion yuan after 8 billion yuan of reverse repurchases matured [10]. - **Funding Rates** - On March 30, the liquidity continued to loosen, and major repo rates declined. DR001 fell 0.67bp to 1.311%, and DR007 fell 1.05bp to 1.429% [11]. 3.3 Bond Market Dynamics - **Interest Rate Bonds** - **Spot Bond Yield Trends** - On March 30, the bond market rallied significantly. The yield of the 10-year Treasury bond active issue 250022 fell 0.80bp to 1.8100%, and the yield of the 10-year CDB bond active issue 250220 fell 1.75bp to 1.9530% [14]. - **Bond Tendering** - Information on the tendering of several bonds, including the 1-year, 3-year, and 10-year bonds, is provided, including the issue scale, winning yield, and other details [15]. - **Credit Bonds** - **Secondary Market Transaction Abnormalities** - On March 30, the trading prices of 3 industrial bonds deviated by more than 10%. "H1 Vanke 04" fell more than 10%, "22 Vanke MTN004" fell more than 38%, and "H1 Vanke 02" rose more than 86% [15]. - **Credit Bond Events** - Multiple companies announced events such as debt repayment uncertainties,逾期有息负债, bond payment arrangement adjustments, and issues related to bond fundraising use and information disclosure [16]. - **Convertible Bonds** - **Equity and Convertible Bond Indexes** - On March 30, the three major A-share indexes showed mixed performance. The convertible bond market corrected following the equity market, with the CSI Convertible Bond Index, Shanghai Stock Exchange Convertible Bond Index, and Shenzhen Stock Exchange Convertible Bond Index falling 0.93%, 0.89%, and 0.98% respectively. Most convertible bond issues fell [18]. - **Convertible Bond Tracking** - On March 30, KeMa Technology's application for issuing convertible bonds was approved by the CSRC [20]. - **Overseas Bond Markets** - **U.S. Bond Market** - On March 30, yields on U.S. Treasuries across all tenors generally declined. The 2-year U.S. Treasury yield fell 6bp to 3.82%, and the 10-year U.S. Treasury yield fell 9bp to 4.35%. The yield spread between the 2-year and 10-year U.S. Treasuries narrowed by 3bp to 53bp, and the yield spread between the 5-year and 30-year U.S. Treasuries widened by 2bp to 94bp [21][22]. - **European Bond Market** - On March 30, yields on 10-year government bonds of major European economies generally declined. The 10-year German government bond yield fell 6bp to 3.04%, and the 10-year government bond yields of France, Italy, and Spain fell 8bp, 8bp, and 4bp respectively [24]. - **Price Changes of Chinese Dollar Bonds** - Information on the daily price changes of Chinese dollar bonds as of the close on March 30 is provided, including the yields and price changes of various bonds [26].

Report Investment Rating - No industry investment rating is provided in the report [1] Core Viewpoints - In March, the bond market showed a divergence in short - and long - term trends. Short - term yields mostly declined, while long - term yields mostly rose. On March 27, the yields of 1 - year/3 - year/5 - year/10 - year/30 - year treasury bonds were 1.25%, 1.33%, 1.55%, 1.82%, and 2.35% respectively, down - 7.0BP/ - 5.2BP/+1.0BP/+4.2BP/+7.8BP compared to February 28 [2][80] - From January to February 2026, the total profit of industrial enterprises above designated size reached 1.02 trillion yuan, a year - on - year increase of 15.2%. The conflict between the US and Iran may narrow the decline of PPI, but due to international energy price fluctuations, enterprise profits in March may be under pressure [2][80] - The recent significant appreciation of the RMB is beneficial to the Chinese bond market. Currently, the long - bond positions of trading desks are still relatively small. The year - on - year recovery of PPI is a general market expectation, and the risk of long - term bonds may be low. It is recommended to seize trading opportunities [2][80] Summary by Directory 1. Macro News - From January to February 2026, the total profit of industrial enterprises above designated size was 1.02 trillion yuan, a year - on - year increase of 15.2%. The operating income was 20.84 trillion yuan, a year - on - year increase of 5.3%. The operating cost was 17.68 trillion yuan, a year - on - year increase of 5.0%. The operating income profit margin was 4.92%, a year - on - year increase of 0.43 percentage points [8] - In January - February 2026, both the general public budget revenue and expenditure increased year - on - year. The general public budget revenue was 4.4 trillion yuan, a year - on - year increase of 0.7%. Tax revenue was 3.6 trillion yuan, a year - on - year increase of 0.1%; non - tax revenue was 0.8 trillion yuan, a year - on - year increase of 3.4%. The general public budget expenditure was 4.7 trillion yuan, a year - on - year increase of 3.6% [10] 2. Mid - level High - frequency Data 2.1 Consumption - As of March 22, the daily average retail volume of passenger cars by manufacturers was 5.1 million vehicles, a year - on - year decrease of 7.0%, and the daily average wholesale volume was 6.2 million vehicles, a year - on - year decrease of 3.0% [17] - As of March 27, the total box office revenue of national movies in the past 7 days was 321.205 million yuan, a year - on - year increase of 35.1% [17] - As of March 20, the total retail volume of three major household appliances was 1.003 million units, a year - on - year decrease of 27.2%, and the total retail sales were 2.19 billion yuan, a year - on - year decrease of 28.9% [23] 2.2 Transportation - As of March 28, the average migration scale index in the past 7 days was 472.3, a year - on - year increase of 6.1% [27] - As of March 22, the number of civil aviation flights guaranteed in the current week was 1.23 million, a year - on - year increase of 3.4% [27] - As of March 27, the average daily passenger volume of the subway in first - tier cities in the past 7 days was 40.56 million person - times, a year - on - year increase of 0.6% [27] - As of March 22, the current - week express delivery collection volume was 3.85 billion pieces, a year - on - year increase of 4.4%, the delivery volume was 3.89 billion pieces, a year - on - year increase of 5.5%, the railway freight volume was 80.312 million tons, a year - on - year increase of 1.0%, and the highway truck traffic volume was 54.585 million vehicles, a year - on - year decrease of 0.1% [30] 2.3 Industry - As of March 27, the iron ore inventory in the current week was 176.668 million tons, a year - on - year increase of 17.9%, the rebar inventory was 6.428 million tons, a year - on - year increase of 5.4%, and the float glass enterprise inventory was 73.622 million tons, a year - on - year increase of 9.9% [32] - As of March 13, the daily coal consumption of key power plants in the current week was 4.85 million tons, a year - on - year decrease of 0.2% [35] - As of March 27, the apparent consumption of steel products in the current week was 8.88 million tons, a year - on - year decrease of 3.5%, the apparent consumption of rebar was 2.254 million tons, a year - on - year decrease of 8.1%, and the apparent consumption of wire rods was 0.92 million tons, a year - on - year decrease of 4.3% [35] - As of March 25, the blast furnace operating rate of major steel enterprises in the current week was 75.3%, a year - on - year decrease of 1.3 percentage points. As of March 26, the average asphalt operating rate was 15.0%, a year - on - year decrease of 8.0 percentage points, the soda ash operating rate was 82.0%, a year - on - year increase of 0.6 percentage points, and the PVC operating rate was 76.1%, a year - on - year decrease of 3.0 percentage points [43] 2.4 Real Estate - As of March 27, the total commercial housing transaction area in 30 large - and medium - sized cities in the past 7 days was 2.706 million square meters, a year - on - year decrease of 10.9% [44] 2.5 Prices - As of March 29, the average wholesale price of pork in the current week was 15.6 yuan/kg, a year - on - year decrease of 25.2%, and a decrease of 8.4% compared to four weeks ago [47] - As of March 27, the average wholesale price of vegetables was 4.8 yuan/kg, a year - on - year increase of 0.3%, and a decrease of 9.8% compared to four weeks ago. The average wholesale price of six key fruits was 7.8 yuan/kg, a year - on - year increase of 3.0%, and a decrease of 2.8% compared to four weeks ago [47] - As of March 27, the average price of thermal coal at northern ports was 755 yuan/ton, a year - on - year increase of 11.7%, and an increase of 3.9% compared to four weeks ago. The average spot price of WTI crude oil was 92.7 US dollars/barrel, a year - on - year increase of 34.0%, and an increase of 42.4% compared to four weeks ago [47] - As of March 27, the average spot price of rebar was 3184.4 yuan/ton, a year - on - year decrease of 0.6%, and an increase of 1.6% compared to four weeks ago. The average spot price of iron ore was 810.1 yuan/ton, a year - on - year increase of 1.6%, and an increase of 5.1% compared to four weeks ago. The average spot price of glass was 13.5 yuan/square meter, a year - on - year decrease of 10.8%, and an increase of 1.7% compared to four weeks ago [54] 3. Bond and Foreign Exchange Markets - On March 27, the overnight Shibor was 1.32%, unchanged from March 23 and down 0.30BP from March 16. R001 was 1.39%, down 0.90BP from March 23 and down 1.22BP from March 16; R007 was 1.51%, up 3.06BP from March 23 and down 0.53BP from March 16. DR001 was 1.32%, down 0.24BP from March 23 and down 0.38BP from March 16; DR007 was 1.44%, up 1.39BP from March 23 and down 1.25BP from March 16. IBO001 was 1.37%, up 0.03BP from March 23 and down 0.27BP from March 16; IBO007 was 1.47%, up 0.57BP from March 23 and down 0.97BP from March 16 [56] - The yields of most treasury bonds declined in the past week. On March 27, the yields of 1 - year/5 - year/10 - year/30 - year treasury bonds were 1.25%/1.55%/1.82%/2.35% respectively, down - 0.7BP/ - 1.0BP/ - 1.2BP/ - 3.7BP compared to March 20 and down - 2.7BP/ - 0.8BP/+0.3BP/ - 1.5BP compared to March 13. The yields to maturity of 1 - year/5 - year/10 - year/30 - year China Development Bank bonds were 1.46%/1.69%/1.96%/2.48% respectively, down - 1.3BP/ - 0.7BP/ - 1.1BP/ - 3.7BP compared to March 20 and down - 3.5BP/ - 2.9BP/ - 0.4BP/ - 2.1BP compared to March 13 [61] - On March 27, the yields to maturity of 1 - year/5 - year/10 - year local government bonds were 1.33%/1.69%/2.00% respectively, down - 4.5BP/ - 1.0BP/+1.7BP compared to March 20 and down - 1.5BP/+1.7BP/+1.7BP compared to March 13. The yields to maturity of AAA 1 - month/1 - year, AA+1 - month/1 - year inter - bank certificates of deposit were 1.43%/1.53%/1.45%/1.55% respectively, down - 3.0BP/+1.3BP/ - 3.0BP/+1.3BP compared to March 20 and down - 7.7BP/ - 0.4BP/ - 7.7BP/ - 0.4BP compared to March 13 [68] - As of March 27, 2026, the yields of 10 - year treasury bonds in the US, Japan, the UK, and Germany were 4.44%, 2.38%, 4.97%, and 3.18% respectively, up 16BP/13.5BP/21.4BP/17BP compared to March 13 [73] - On March 27, the central parity and spot exchange rate of the US dollar against the RMB were 6.91/6.91 respectively, up 243/288 pips compared to March 20 and up 134/75 pips compared to March 13 [76] 4. Institutional Behavior - The duration of medium - and long - term pure bond funds has decreased. On March 27, 2026, the median duration of medium - and long - term interest - rate bond funds was about 2.8 years, a decrease of about 0.48 years compared to March 13. The median duration of credit bond funds was about 1.7 years, a decrease of about 0.97 years compared to March 13 [77][78] 5. Investment Recommendations - In 2026, the total supply of the bond market is expected to be stable, and the supply - demand relationship in the bond market is expected to improve. It is predicted that the yield of 10 - year treasury bonds will fluctuate in the range of 1.6% - 1.9%, and the yield of 30 - year treasury bonds will fluctuate in the range of 1.9% - 2.4%. Currently, it is recommended to pay attention to the opportunities of 30 - year old treasury bonds, 10 - year China Development Bank bonds, and long - duration subordinated capital bonds [82] - The Fed's interest rate cut may be postponed to May 2026 or later. China's exports are resilient, and domestic policy rate cuts may be late, possibly in the middle of the year or later. It is expected that bond market investments may be relatively favorable in the second half of the year [82]

Group 1 - The central bank conducted a reverse repurchase operation of 146.2 billion yuan for 7 days at a fixed rate of 1.40%, resulting in a net injection of 125.7 billion yuan after accounting for 20.5 billion yuan maturing that day [1][3] - The interbank market remains loose, with the weighted average rate of DR001 slightly declining to around 1.31%, indicating ample liquidity [3] - The yield on major interbank bonds has decreased across the board, with the latest transaction for one-year interbank certificates of deposit at approximately 1.531% [8][10] Group 2 - The People's Bank of China emphasized the need to enhance the systemic financial risk prevention and resolution framework, focusing on technology empowerment and financial risk monitoring [14] - The Ministry of Commerce announced investigations into trade barriers imposed by the U.S. regarding global supply chains and green product trade, aiming to protect China's legitimate rights [14] - Recent bond market events include Sunshine City having overdue debt principal totaling 65.336 billion yuan, while other companies like Jinju Jidong and Hejing Group reported changes in their financial statuses [19]

Report Summary 1. Investment Rating The given content does not mention the investment rating of the industry. 2. Core View On March 26, the central bank's reverse repurchase operation volume increased, the capital market was generally loose, the bond market continued its warm trend, the main indices of the convertible bond market collectively declined, and most convertible bond issues fell. Yields on U.S. Treasuries of various maturities generally rose significantly, and yields on 10-year government bonds of major European economies generally rose significantly [2]. 3. Summary by Directory 3.1 Bond Market News - **Domestic News**: Trump plans to visit China from May 14 - 15; the Ministry of Commerce will optimize the inbound consumption environment and expand service exports; the National Healthcare Security Administration will cover the whole population with long - term care insurance in about 3 years; the State Administration for Market Regulation held an enterprise fair competition symposium [4][5][6]. - **International News**: Trump postponed the strike on Iranian energy facilities by ten days; U.S. Treasury auctions this week were weak, and the decline of U.S. Treasuries intensified [7]. - **Commodities**: WTI May crude oil futures rose 4.61% to $94.48 per barrel, Brent May crude oil futures rose 5.66% to $108.01 per barrel, COMEX gold futures fell 2.131.35% to $4407.50 per ounce, and NYMEX May natural gas futures fell 0.37% to $2.974 per million British thermal units [8]. 3.2 Capital Market - **Open Market Operations**: On March 26, the central bank conducted 224 billion yuan of 7 - day reverse repurchase operations with an operating interest rate of 1.40%, and the net capital injection on the day was 211 billion yuan [10]. - **Capital Interest Rates**: On March 26, the central bank's reverse repurchase operation volume increased, and the capital market was generally loose. DR001 remained flat at 1.321%, and DR007 fell 0.09bp to 1.444% [11]. 3.3 Bond Market Dynamics - **Interest - rate Bonds** - **Spot Bond Yield Trends**: On March 26, the bond market continued its warm trend. As of 20:00 Beijing time, the yield of the 10 - year Treasury bond active issue 250022 fell 0.40bp to 1.8230%, and the yield of the 10 - year China Development Bank bond active issue 250220 remained flat at 1.9730% [14]. - **Bond Tendering Situation**: Information on the tendering of multiple bonds such as 25 Guokai Qingfa 07 (Additional Issue 19) is provided [16]. - **Credit Bonds** - **Secondary Market Transaction Abnormalities**: On March 26, 4 industrial bonds and 1 urban investment bond had transaction price deviations of more than 10% [17][18]. - **Credit Bond Events**: Companies such as Taihe Group, Sunshine City, and Sunac Real Estate announced debt - related issues, and some companies cancelled bond issuances [19][21]. - **Convertible Bonds** - **Equity and Convertible Bond Indices**: On March 26, the three major A - share indices and convertible bond market indices collectively fell. The trading volume of the convertible bond market was 61.446 billion yuan, a decrease of 13.382 billion yuan from the previous trading day [20]. - **Convertible Bond Tracking**: Longda Convertible Bond announced that it was about to trigger the conversion price downward - revision clause, and Tianhao Convertible Bond and Tianyuan Convertible Bond announced that they were about to trigger the early redemption clause [26]. - **Overseas Bond Markets** - **U.S. Bond Market**: On March 26, yields on U.S. Treasuries of various maturities generally rose significantly. The 2/10 - year U.S. Treasury yield spread narrowed by 3bp to 46bp, and the 5/30 - year U.S. Treasury yield spread narrowed by 8bp to 85bp. The break - even inflation rate of the 10 - year U.S. Treasury Inflation - Protected Securities (TIPS) rose 3bp to 2.34% [23][24][25]. - **European Bond Market**: On March 26, yields on 10 - year government bonds of major European economies generally rose significantly [26][27]. - **Daily Price Changes of Chinese - funded U.S. Dollar Bonds**: Information on the daily price changes of Chinese - funded U.S. dollar bonds as of the close on March 26 is provided [28].

Core Viewpoint - The article emphasizes the importance of understanding the relationship between short-selling tools and their pricing anchors in constructing neutral strategies in the bond market [1]. Group 1: Neutral Strategy Tools - Common hedging tools include government bond futures and bond lending, with government bond futures prices closely tied to their cheapest-to-deliver (CTD) bonds [1]. - The TL contract typically anchors to 30-year old bonds, while the T contract anchors to 7-year government bonds, necessitating a focus on the stability of the spread between current bonds and CTD bonds when employing neutral strategies [1]. - Bond lending directly targets the most liquid active bonds, but investors must be cautious of high lending rates and concentration risks that can lead to negative carry costs [1]. Group 2: Types of Neutral Strategies - The article identifies three main types of neutral strategy instruments: 1. **30-Year Old Government Bonds**: Investors need to clarify whether they are betting on mean reversion or a trend-based recovery. The spread between the old bonds and TL contract CTD bonds remains stable around 0 basis points, making it suitable for narrow spread fluctuations [2]. 2. **Ultra-Long Local Government Bonds**: These should prioritize bond lending for precise alignment, as their pricing logic closely mirrors that of 30-year government bonds, providing a solid basis for constructing neutral strategies [3]. 3. **Policy Bank Bonds**: The 7-year bonds are best hedged with government bond futures, while the 10-year bonds are more suited for bond lending. Using the T contract for 10-year policy bank bonds may lead to misalignment due to the influence of the 10Y-7Y spread [3].

Group 1: Report Industry Investment Rating - No information provided Group 2: Core View of the Report - The inflation pressure pushed up by the supply side has a relatively limited impact on the bond market. The current main factor negative to the bond market is the front - loaded and intensified use of fiscal and quasi - fiscal tools. The bank system's liquidity may be relatively abundant, and the cross - quarter fund pressure is expected to be limited. The interest rate is expected to remain in a range - bound pattern. Short - term inflation changes should be observed. There may be opportunities for medium - and long - term bond varieties, and attention should be paid to the narrowing of the term spread [4][20] Group 3: Summary by Directory 1. Funds Price - During the statistical period from March 20 to March 26, 2026, the central bank's net open - market fund injection exceeded 10 billion yuan, with an over - renewal of 5 billion yuan for MLF. The 3M and 6M repurchase operations had a net withdrawal of 30 billion yuan, showing a net withdrawal of medium - term liquidity. The funds price remained stable, with DR001 fluctuating narrowly around 1.32%, and DR007 rising slightly due to the cross - quarter factor. The yield of inter - bank certificates of deposit rebounded slightly from a low level [1][11] 2. Primary Market - During the statistical period, 45 interest - rate bonds were issued in the primary market, with a total actual issuance of 818.7 billion yuan. The issuance scale of treasury bonds increased, while that of local bonds decreased. The issuance term continued to shorten, and the proportion of issuance scale over 10 years dropped below 40% [2][13] 3. Secondary Market - During the statistical period, the yields of most - term treasury bonds declined, and the impact of energy inflation on the bond market weakened. The yield of ultra - long - term bonds, which were most affected before, declined significantly, with the yield of 30 - year treasury bonds dropping from the peak of 2.39% to 2.35% [3][14] 4. Market Outlook - Fundamentally, the inflation pressure pushed up by the supply side has a relatively limited impact on the bond market, and the adjustment range of the 10 - year treasury bond yield is generally 10 - 20bp. Policy - wise, the front - loaded and intensified use of fiscal and quasi - fiscal tools is negative to the bond market. In terms of funds, the bank system's liquidity may be relatively abundant, and the cross - quarter fund pressure is expected to be limited. The interest rate is expected to remain in a range - bound pattern. Short - term inflation changes should be observed. There may be opportunities for medium - and long - term bond varieties, and attention should be paid to the narrowing of the term spread [4][20]

Group 1 - The report emphasizes the importance of distinguishing between different hedging strategies based on the type and maturity of bonds, specifically focusing on 30-year government bonds, local government bonds, and policy bank bonds for implementing neutral strategies [1][4]. - The core trading strategy involves identifying the most cost-effective spread opportunities in the bond market and utilizing government bond futures to construct neutral strategies that mitigate directional risks while stabilizing the spread convergence [7][8]. - The report outlines that common neutral strategy varieties include: 1) 30-year government bonds, where the focus is on mean reversion versus trend-based trading; 2) ultra-long local government bonds, which require precise alignment; and 3) policy bank bonds, where different maturities necessitate different hedging tools [4][18][25]. Group 2 - The report details that government bond futures are closely tied to the cheapest-to-deliver (CTD) bonds, which may not always align with the movements of actively traded bonds of the same maturity, necessitating careful consideration of the spread between the target bonds and CTD bonds [8][12]. - It highlights that the TL contract is primarily anchored to 30-year government bonds, and the spread between old and new bonds should be monitored for effective arbitrage [9][19]. - The report indicates that the T contract is linked to 7-year government bonds, and the strategy must account for the 10-7 year spread, which has shown significant fluctuations in recent years [13][25]. Group 3 - The analysis of neutral strategies reveals that the 30-year government bonds exhibit a stable spread around 0 basis points, making them suitable for high-certainty narrow spread trading [19][28]. - For ultra-long local government bonds, the report suggests that bond lending is a more robust choice due to the stable mean-reversion characteristics of the spread with 30-year government bonds, while also allowing for precise targeting of liquidity [22][30]. - The report notes that for policy bank bonds, the 7-year bonds are better suited for hedging with government bond futures, while the 10-year bonds require careful consideration of the 10-7 year spread to avoid hedging mismatches [25][35].

Report Summary 1. Industry Investment Rating No investment rating information is provided in the report. 2. Core Viewpoints On March 24, the capital market was stable and loose, the bond market showed a slight recovery, the main indices of the convertible bond market rose collectively, most convertible bond individual securities increased, the yields of US Treasury bonds across various maturities generally rose, and the yields of 10 - year government bonds in major European economies generally increased [1][2]. 3. Summary by Directory 3.1 Bond Market News - **Domestic News**: The central bank will conduct a 500 - billion - yuan 1 - year MLF operation on March 25, resulting in a net injection of 50 billion yuan after considering the maturity amount. In addition, a 1.3 - trillion - yuan outright reverse repurchase was carried out, with a net withdrawal of 300 billion yuan after offsetting the maturity. In total, the medium - term liquidity in March had a net withdrawal of 250 billion yuan. The Ministry of Industry and Information Technology plans to promote the introduction of policies for data elements to empower new - type industrialization, and the National Data Bureau will take a series of measures to promote the high - quality development of the digital economy [4][5]. - **International News**: The US March composite PMI unexpectedly dropped to 51.4, with the manufacturing expansion accelerating and the service industry growth slowing. The data signals "slowing growth and rising inflation", and the US may face the risk of "stagflation" [7]. - **Commodities**: On March 24, WTI May crude oil futures rose 4.79% to $92.35 per barrel, Brent May crude oil futures rose 4.55% to $104.49 per barrel, COMEX gold spot price rose 1.15% to $4459.60 per ounce, and NYMEX May natural gas futures price fell 0.48% to $2.898 per million British thermal units [8]. 3.2 Capital Market - **Open Market Operations**: On March 24, the central bank conducted a 17.5 - billion - yuan 7 - day reverse repurchase operation at a fixed interest rate, with a net withdrawal of 3.35 billion yuan due to the maturity of 51 billion yuan of reverse repurchases [10]. - **Capital Interest Rates**: On March 24, the capital market remained stable and loose. DR001 rose 0.25bp to 1.323%, and DR007 fell 1.43bp to 1.412%. Other interest rates also showed corresponding changes [11][12]. 3.3 Bond Market Dynamics - **Interest - rate Bonds** - **Spot Bond Yield Trends**: On March 24, with the release of news about the easing of the US - Iran conflict overseas, the bond market fluctuated and recovered. As of 20:00, the yield of the 10 - year Treasury bond active bond 250022 fell 0.80bp to 1.8310%, and the yield of the 10 - year China Development Bank bond active bond 250220 fell 0.30bp to 1.9730% [14]. - **Bond Tendering Situation**: Various bonds such as 26Guokai02 (Increment 3), 26Guokai03 (Increment 4), etc., were tendered, with different issuance scales, winning yields, full - field multiples, and marginal multiples [16]. - **Credit Bonds** - **Secondary - market Transaction Abnormalities**: On March 24, the transaction prices of 3 industrial bonds deviated by more than 10%. "H2 Vanke 04" fell 20%, "H2 Vanke 02" rose more than 14%, and "H1 Vanke 06" rose 17% [17]. - **Credit Bond Events**: Companies such as Zhongnan Construction, Rongsheng Development, and China Aoyuan announced relevant events such as bond principal repayment extensions, guarantee provisions, and overseas debt restructuring progress [18]. - **Convertible Bonds** - **Equity and Convertible Bond Indices**: On March 24, the A - share market rebounded strongly, with more than 5100 stocks rising. The Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index rose 1.78%, 1.43%, and 0.50% respectively. The main indices of the convertible bond market also rose collectively, with the CSI Convertible Bond Index, Shanghai Convertible Bond Index, and Shenzhen Convertible Bond Index rising 2.19%, 2.14%, and 2.24% respectively. Most convertible bond individual securities rose [19]. - **Convertible Bond Tracking**: On March 26, Xianghe Convertible Bond will be listed. Some companies' ratings were terminated, and Jinhong Convertible Bond announced that it was about to trigger the early redemption clause [20][21][22]. - **Overseas Bond Markets** - **US Bond Market**: On March 24, the yields of US Treasury bonds across various maturities generally rose. The 2 - year US Treasury bond yield rose 7bp to 3.90%, and the 10 - year US Treasury bond yield rose 5bp to 4.39%. The yield spreads between 2 - year and 10 - year, and 5 - year and 30 - year US Treasury bonds narrowed [23][24]. - **European Bond Market**: On March 24, the 10 - year German government bond yield fell 1bp to 3.01%, while the 10 - year government bond yields of other major European economies generally rose [26]. - **Daily Price Changes of Chinese - funded US - dollar Bonds**: As of the close on March 24, the prices of Chinese - funded US - dollar bonds showed different changes, with some rising and some falling [28].

Interest Rate Spread Overview - Since 2026, the bond market has performed well, with yields on government bonds and short-term notes generally declining[2] - The credit spread for short-term notes has narrowed, with changes mostly between 1-11 basis points (bp)[2] - The highest industry spread is in the real estate sector at 107bp, which expanded by 17bp due to the Vanke incident[2][9] - Other sectors with spreads above 45bp include information technology, agriculture, wholesale and retail, coal, and pharmaceuticals[2][9] Investment Strategy Insights - The government work report emphasizes structural opportunities in policy-supported sectors, particularly in consumption and technology innovation[3][4] - The report highlights the need to accelerate the cultivation of new consumption growth points, focusing on cultural tourism, events, and health care[3] - The commercial and personal services sector has a current spread of around 30bp, indicating potential for compression[3][10] - Continuous support for real estate policies is expected, with a focus on stabilizing market expectations and risk mitigation[5][7] Market Dynamics - The real estate sector's sales area decreased by 8.7% year-on-year, indicating ongoing pressure on sales[7] - The bond market sentiment has been affected by the outflow of technology innovation bonds (Tech Bonds), with a total reduction of 88.8 billion yuan as of March 11[6][10] - The spreads for AAA-rated industries are mostly compressing, while the real estate sector's spread has notably widened[17][23]