Summary of Conference Call Notes Industry or Company Involved - The notes primarily focus on the fixed income market, particularly the credit bond market and convertible bond market in China. Core Points and Arguments 1. **Asset Allocation Trends** - The allocation of amortized cost method funds has significantly shifted towards high-grade credit bonds and commercial bank financial bonds, with proportions exceeding 70% for public credit bonds and commercial bank bonds, reflecting a preference for higher yield assets due to low short-term interest rates [1][3][5] 2. **Market Demand Forecast** - By the end of 2026, the remaining maturity scale of amortized cost method funds is expected to reach 744.4 billion yuan, with incremental funding needs for public credit and commercial bank bonds estimated at 200.2 billion yuan and 136.2 billion yuan respectively, indicating a notable increase in market demand for these assets [1][6] 3. **Credit Risk Management** - High-grade central state-owned enterprise bonds dominate the credit asset holdings, with a focus on low credit risk and valuation fluctuations. The preference remains for high-rated credit and commercial bank financial assets [1][7] 4. **Monetary Policy and Interest Rate Outlook** - The recent slowdown in social financing credit growth and the emphasis on structural optimization rather than rapid stimulus suggest a potential opening of the lower bound for interest rate fluctuations in the medium to long term, although short-term expectations for rate cuts remain unfavorable [1][8][9][10] 5. **Impact of Policy on Credit Growth** - Current policy directions support a slowdown in credit growth, which may lead to a contraction in bank balance sheets. Historical data indicates that during periods of slowed bank expansion, the yield spread between long-term and short-term government bonds tends to widen [1][11][12] 6. **Convertible Bond Market Dynamics** - The convertible bond market faces supply and demand pressures, with expected issuance of 50-100 billion yuan in new convertible bonds over the next 6-12 months. Despite this, strong performance of underlying stocks and capital inflows create a positive feedback loop, limiting long-term valuation compression [2][13] 7. **Investment Strategy for Convertible Bonds** - Suggested strategies include focusing on sectors aligned with upward trends in the equity market, such as solid-state batteries and AI applications, while maintaining a balanced portfolio of cyclical and defensive bonds [2][14][15] 8. **Market Outlook** - The overall market outlook remains optimistic despite external disturbances, with limited downside potential and an upward trend expected to dominate, supported by improved corporate performance and favorable policy developments [2][16] Other Important but Possibly Overlooked Content - The shift in asset allocation reflects a broader trend of institutional investors seeking higher yields in a low-interest-rate environment, indicating a potential long-term change in investment strategies within the fixed income market [1][5] - The emphasis on high-grade assets suggests a cautious approach to credit risk, which may influence future investment decisions and market dynamics [1][7]

1. Report Industry Investment Rating The provided content does not mention the industry investment rating. 2. Core View of the Report - Last week, interest - rate bonds fluctuated weakly, while credit bonds showed a differentiated trend. High - grade credit bonds also weakened but with smaller declines, and medium - and low - grade short - duration bonds weakened, yet the yields of 3 - 5Y bonds continued to decline. The trading sentiment in the bond market cooled down, and the bond market became weaker as the equity market strengthened in the second half of the week. The market for ultra - long - term credit bonds also weakened, with only the yields of ultra - long - term urban investment bonds with the weakest liquidity recovering inversely [2][10]. - The "volatility amplifier" characteristic of secondary - tier perpetual bonds reappeared, with a larger decline than that of general credit bonds and interest - rate bonds of the same term. The yields of 1 - 5Y, 7Y, and 10Y AAA - bank secondary capital bonds increased by 2.94BP, 5.39BP, 4.35BP, 4.23BP, 4.16BP, 1.30BP, and 0.64BP respectively [3][16]. - Public funds have shown a significant trend of chasing long - duration bonds for two consecutive weeks, mainly focusing on 3 - 5Y bonds. Other institutions such as wealth management and insurance have relatively stable demand for credit bonds. The behavior of public funds chasing long - duration bonds may continue in the short term, influenced by the concentrated opening of amortized - cost - method funds and the improved performance of credit ETF products [3][4][29]. - The strategy still recommends selecting bonds from weakly - qualified urban investment bonds with a 3 - 5Y term. For trading positions, it is not recommended to chase ultra - long - term credit bonds in band operations. However, there is a small window period for band operations of secondary - tier perpetual bonds recently, as the adjustment range of secondary - tier perpetual bonds was relatively large last week, and the yields of medium - and high - grade 4 - 5Y bonds are currently in a relatively safe range after adding points [5][38]. 3. Summary According to Relevant Catalogs 3.1 Fund's Two Marginal Changes in Chasing Long - Duration Bonds - **Bond Market Performance**: From November 3 to November 7, 2025, the yields of 1Y, 2Y, 3Y, 4Y, and 5Y treasury bonds increased by 2.2BP, 3.2BP, 3.0BP, 2.7BP, and 2.1BP respectively. The yields of AAA medium - and short - term notes of the same term increased by 1.2BP, 2.3BP, decreased by 0.5BP, increased by 1.6BP, and 0.2BP respectively. The yields of AA + medium - and short - term notes increased by 1.2BP, 0.3BP, decreased by 0.5BP, 2.4BP, and 2.8BP respectively. The yields of ultra - long - term credit bonds also weakened, except for the inverse recovery of the yields of ultra - long - term urban investment bonds with the weakest liquidity [10][11]. - **Curve Shape**: The steepness of the 1 - 2Y and 2 - 3Y segments of all grades is the highest, and the steepness of the 3 - 5Y segment of low - grade bonds is also relatively high, but it has been decreasing for two consecutive weeks. Taking the yield term structure diagrams of AA + medium - term notes and AA urban investment bonds as examples, the slopes of the 1 - 2Y, 2 - 3Y, and 3 - 5Y segments of AA + medium - term notes are 0.0909, 0.1109, and 0.0605 respectively; those of AA urban investment bonds are 0.1231, 0.1236, and 0.0953 respectively [12]. - **Institutional Behavior**: Public funds have shown a significant trend of chasing long - duration bonds for two consecutive weeks, mainly focusing on 3 - 5Y bonds. Last week, funds net - bought 181.17 billion yuan of 1 - 3Y credit bonds, 110.48 billion yuan of 3 - 5Y credit bonds, and 31.96 billion yuan of 7 - 10Y credit bonds. The buying intensity of wealth management products for credit bonds slowed down last week, mainly net - buying 25.66 billion yuan of 1 - 3Y credit bonds. Insurance companies' buying intensity for general credit bonds has been relatively stable in the past two weeks, net - buying 32.65 billion yuan of 1 - 3Y credit bonds and 26.56 billion yuan of 3 - 5Y credit bonds [3][29]. - **Reasons for Chasing Long - Duration Bonds**: Firstly, affected by the concentrated opening of amortized - cost - method funds, the demand for credit - bond allocation of such funds has increased significantly this year. The scale of funds expected to open in the fourth quarter is large, and the proportion of products with a long - term closed - end period is high, which may support the 3 - 5Y credit - bond market. Secondly, the market of credit ETF products has improved recently, with the net - worth performance improving and the trading duration lengthening, which may also drive public funds to chase long - duration bonds [4][32][33]. 3.2 Secondary - Tier Perpetual Bonds - **Yield Changes**: The "volatility amplifier" characteristic of secondary - tier perpetual bonds reappeared, with a larger decline than that of general credit bonds and interest - rate bonds of the same term. The yields of 1 - 5Y, 7Y, and 10Y AAA - bank secondary capital bonds increased by 2.94BP, 5.39BP, 4.35BP, 4.23BP, 4.16BP, 1.30BP, and 0.64BP respectively. The yields of the part above 4Y are still 30BP - 50BP away from the lowest point since 2025, and the adjustment range is higher than that of the sharp decline at the end of July [3][16]. - **Trading Activity**: In the first half of the week, the buying power was strong, but it weakened significantly in the second half of the week. From November 3 to November 7, the proportion of transactions below the valuation of secondary - tier perpetual bonds was 100.00%, 100.00%, 100.00%, 2.50%, and 12.50% respectively; the average trading duration was 6.95 years, 6.67 years, 6.51 years, 0.91 years, and 0.85 years respectively. The amplitude of transactions below the valuation was generally low last week [18]. 3.3 Ultra - Long - Term Credit Bonds - **Trading Volume and Price**: The selling volume of ultra - long - term credit bonds increased in the second half of last week, and the focus of discounted transactions was on weakly - qualified urban investment bonds. From November 3 to November 7, the proportion of discounted transactions of ultra - long - term credit bonds was 5.00%, 2.50%, 5.00%, 85.00%, and 35.00% respectively. The discount amplitude was generally within 4BP, and about 15% of the discount amplitude was above 4BP, mainly from weakly - qualified urban investment bonds [23]. - **Trading Activity Below Valuation**: The trading activity of ultra - long - term credit bonds below the valuation decreased marginally. From November 3 to November 7, the proportion of transactions below the valuation was 32.50%, 52.50%, 57.50%, 10.00%, and 20.00% respectively. About 47% of the transactions below the valuation had an amplitude of 4BP or more, mainly from 2 - 5Y AA(2) and AA weakly - qualified urban investment bonds, whose liquidity has improved recently [25][27].