1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The overall policy tone of the third - quarter monetary policy in 2025 remains moderately loose and emphasizes enhanced counter - cyclical adjustment. The policy has shifted from "tool deployment" to "efficiency improvement", with a focus on implementing policies and enhancing transmission mechanisms. The probability of comprehensive interest rate cuts and reserve requirement ratio cuts in the short term is low, but the use of structural tools is expected to increase [3][4][60]. - In the bond market, due to factors such as the expected introduction of the new public fund sales fee regulations, the bond market is facing re - allocation opportunities. The impact of the new regulations on different bond types will be structurally differentiated [5][71]. 3. Summary by Directory 3.1 Bond Market Weekly Review - From September 22 - 26, the bond market was mainly affected by liquidity, and the Treasury bond yields first rose and then fell. The yield of the 10 - year Treasury bond active bond ranged from 1.7850% to 1.8360% [2][9]. - On September 22, the central bank's open - market operations and the unchanged LPR quotes dampened market expectations for further monetary policy easing. In the following three trading days, the central bank's operations changed rhythm, leading to fluctuations in bond market sentiment. By September 26, the central bank's operations effectively boosted market confidence, and most yields of inter - bank interest - rate bonds declined [9][10]. - As of September 26, Treasury bond yields generally first rose and then fell. The 1 - year Treasury bond yield was 1.3825%, down 0.75bp from the previous Friday; the 10 - year Treasury bond yield was 1.8768%, down 0.21bp; the 30 - year Treasury bond yield was 2.2170%, up 1.74bp. Key term spreads of Treasury bonds showed differentiation [11][14][18]. 3.2 Bond Market Data Tracking 3.2.1 Funding Situation - From September 22 - 26, the central bank's open - market operations had a net investment of 940.6 billion yuan. Funding rates showed differentiation. The R001 and DR001 decreased, while the R007 and DR007 increased. The difference in funding costs between non - bank institutions and banks widened, and the term spread of FR007S5Y - FR007S1Y expanded [20][21]. - SHIBOR rates declined. As of September 26, SHIBOR overnight, 1 - week, 2 - week, 1 - month, and 3 - month rates changed by - 14.00bp, 1.30bp, - 0.10bp, 1.90bp, and 1.40bp respectively compared to September 19 [32]. 3.2.2 Supply Side - From September 22 - 26, the total issuance of interest - rate bonds decreased, and the net financing amount decreased. The total issuance of government bonds decreased, and the net financing amount decreased. The issuance scale of inter - bank certificates of deposit decreased, the net financing amount decreased, and the issuance rate increased [37][40][47]. 3.3 Next Week's Outlook and Strategy 3.3.1 Interpretation of the Third - Quarter Meeting of the Central Bank's Monetary Policy Committee - The overall policy tone remains moderately loose, but there are marginal adjustments. The policy has entered the observation and implementation period, with a more cautious and flexible attitude, emphasizing implementation and efficiency, and strengthening support for key areas such as small and micro enterprises and foreign trade [59][60][61]. - The probability of comprehensive interest rate cuts and reserve requirement ratio cuts in the short term is low, but the frequency and scale of using structural tools are expected to increase [4][61]. 3.3.2 Next Week's Outlook - The supply pressure of Treasury bonds will decrease next week. The total issuance scale of interest - rate bonds from September 22 - 26 decreased, and there are no Treasury bond issuance plans next week, while local government bonds are planned to issue 107.153 billion yuan [64]. - As it approaches the end of the quarter, the central bank's open - market operations' net investment was 940.6 billion yuan from September 22 - 26. Next week, reverse repurchase maturities are 1567.4 billion yuan. The funding rate center is expected to rise, and the funding situation will remain in a tight balance [20][65]. 3.3.3 Bond Market Strategy - The bond market has been under pressure recently due to factors such as the strengthening of M1 year - on - year, the recovery of market risk appetite, and inflation expectations. The one - year rolling stock - bond spread is approaching the + 2 times standard deviation range [67]. - The expected introduction of the new public fund sales fee regulations is a key variable affecting the bond market's micro - structure. If the regulations remain unchanged, it may lead to bond funds' passive asset sales. The impact on different bond types will be structurally differentiated, with 5 - year Treasury bonds and policy - financial bonds expected to show relative resilience [5][71]. 3.4 Global Major Asset Classes - The U.S. Treasury yield curve flattened. As of September 26, 2025, the yields of 1Y, 2Y, 3Y, 5Y, 10Y, and 30Y U.S. Treasuries changed by + 7bp, + 6bp, + 10bp, + 8bp, + 6bp, and + 2bp respectively compared to September 19, and the 10Y - 2Y term spread remained unchanged at 57bp [74]. - The U.S. dollar index rose slightly, and the central parity rate of the U.S. dollar against the RMB was raised. Gold, silver, and crude oil prices increased [74][75][78].

Report Industry Investment Rating - Not provided in the content Core Viewpoints of the Report - The issuance rules of local government bonds have changed significantly in the past decade. Policy encourages the issuance of longer - term special bonds, and the weighted average issuance term of local government bonds has been greatly extended. There may be pressure of supply - demand imbalance for ultra - long bonds in the future, and high macro - leverage ratio in the non - financial sector may lead to increased debt pressure when interest rates rise. It is recommended to address the supply - demand imbalance from both the supply and demand sides [1] Summary by Related Catalogs Changes in Local Government Bond Issuance Rules - In 2015, local governments fully launched independent bond issuance, with a maximum term of 10 years and strict restrictions on medium - and long - term proportions. In 2018, 15 - year and 20 - year terms were added. In 2019, the limit on the term - ratio structure of local bond issuance was removed, and long - term special bonds were encouraged. In 2020, 9 terms were specified, and requirements for the average issuance term of new general bonds were set [1] Differences between General Bonds and Special Bonds - General bonds are used for non - revenue public welfare projects, repaid mainly by general public budget revenue, with an average term within 10 years. Special bonds are for projects with certain revenues, repaid by government fund revenues or special revenues, and long - term issuance is encouraged. In 2025, 4.4 trillion yuan of local government special bonds are planned [1] Changes in the Weighted Average Issuance Term of Local Government Bonds - From 2015 - 2018, the weighted average issuance term was about 6 years. Since 2019, it has increased significantly from 10.3 years in 2019 to 15.5 years as of September 15, 2025. The proportion of local bonds with a term of 15 years and above has risen from 18.6% in 2019 to 48.6% as of September 15, 2025 [1] Potential Supply - Demand Imbalance of Ultra - Long Bonds - The annual issuance scale of interest - bearing bonds with a term of 20 years and above has increased from 1.96 trillion in 2021 to 4.65 trillion as of September 25, 2025. The demand for ultra - long bonds mainly comes from life insurance. However, factors such as the significant reduction of insurance preset interest rates, the peak of non - standard investment maturity of insurance funds, and the new regulations on punitive redemption fees of public funds may lead to a weakening of demand. Banks may also net sell ultra - long interest - bearing bonds in the secondary market [1] High Macro - Leverage Ratio and Debt Pressure - As of the end of March 2025, China's non - financial sector macro - leverage ratio was 292.2%, significantly higher than the average of developed economies (258%). Rising interest rates may increase the debt pressure on enterprises and local governments [1] Suggestions to Alleviate Supply - Demand Imbalance - Demand side: The central bank should restart the purchase of government bonds and expand the scope to local bonds, and encourage banks to promote ultra - long interest - bearing bonds to individual investors and guide long - term funds such as social security and annuities to increase investment. Supply side: Control the proportion of government bonds with a term of 15 years and above and encourage the issuance of floating - rate bonds [2]

Group 1 - As of the end of August, foreign institutions held 3.83 trillion yuan in the interbank bond market, accounting for approximately 2.3% of the total custody amount in the market [1] - Among the types of bonds held by foreign institutions, government bonds amounted to 2.01 trillion yuan, representing 52.5% of the total, while interbank certificates of deposit were 0.91 trillion yuan, making up 23.8%, and policy financial bonds were 0.74 trillion yuan, accounting for 19.3% [1] - In August, one new foreign institution entered the interbank bond market, bringing the total to 1,167 foreign institutions, with 607 entering through direct investment channels and 831 through the "Bond Connect" channel [1] Group 2 - The trading volume of cash bonds by foreign institutions in the interbank bond market in August was approximately 1.15 trillion yuan, with an average daily trading volume of about 546 billion yuan [1]

Group 1 - The core viewpoint of the article highlights a significant shift in global capital flows, with foreign investors increasing their holdings in U.S. Treasury bonds while simultaneously reducing their investments in Chinese bonds, indicating a search for stability and better opportunities in uncertain times [1][3][25] - In June, foreign investors added $80.2 billion to U.S. Treasury holdings, bringing the total to $9.13 trillion, a record high, while foreign investment in Chinese bonds decreased by 370 billion yuan in the first half of the year, with over 90 billion yuan withdrawn in May alone [1][12] - The article suggests that the current trend of investing in U.S. Treasuries is driven by a combination of global uncertainties, including market volatility and geopolitical tensions, rather than a sudden increase in the attractiveness of U.S. assets [5][10][25] Group 2 - The expectation of a potential interest rate cut by the Federal Reserve is seen as a favorable opportunity for bond investors, as it could lead to higher prices for existing bonds, creating a "price difference" profit opportunity [7][8] - The reduction in foreign investment in Chinese bonds is characterized as a tactical repositioning rather than a complete withdrawal, with foreign investors still holding approximately 4.3 trillion yuan in Chinese bonds, which is less than 2.5% of the total market [12][13] - The article emphasizes that the capital outflow from the Chinese bond market is not indicative of a lack of confidence in China, but rather a strategic adjustment in response to market conditions and the performance of other asset classes, such as equities [17][19][25] Group 3 - The capital movement is framed as a global rebalancing rather than a direct confrontation between the U.S. and China, with international funds diversifying their investments across various markets, including Canada, Germany, and Japan [19][21] - The unique value of Chinese bonds is increasingly recognized, particularly their low correlation with bonds from developed economies, providing a valuable hedging opportunity for investors [21][23] - The article concludes that the current dynamics in the capital markets reflect a broader trend of seeking stability and risk diversification, with capital flows being driven by long-term strategic considerations rather than short-term market reactions [25][27]

Group 1 - The Federal Reserve has decided to lower the federal funds rate target range by 25 basis points to between 4.00% and 4.25%, marking the first rate cut since December 2024 [1][3] - The recent job growth in the U.S. has been significantly below expectations, prompting the Fed to take this action, with further rate cuts anticipated in upcoming meetings [3] - Following the announcement, the U.S. stock market initially rose but then reversed gains, with the S&P 500 index turning negative and the Nasdaq down by 0.5% [3] Group 2 - The U.S. dollar index fell to 96.22, the lowest level since February 2022, indicating a weakening dollar [6] - The Fed's median projections suggest a further 50 basis points cut in 2025, and 25 basis points cuts in both 2026 and 2027, with expected rates of 3.6%, 3.4%, and 3.1% respectively [6] - The rate cut is expected to increase money supply, lower loan rates, and encourage consumption and investment, positively impacting economic growth and market liquidity [6] Group 3 - Analysts predict that the Fed's rate cut may trigger a global wave of central bank rate cuts, potentially benefiting the A-share market in China and leading to a second wave of market rally [9] - Historical analysis shows that during previous Fed rate cuts, growth sectors and interest-sensitive industries in both A-shares and Hong Kong stocks have benefited from lower interest rates [9] - The Chinese bond market may attract foreign investment due to reduced pressure from U.S.-China interest rate differentials, enhancing the appeal of Chinese government and policy financial bonds [10]

Group 1 - The bond market has experienced significant adjustments in August, with many medium to long-term pure bond funds facing pressure on net value due to rising bond yields and frequent redemptions from bond funds [1] - Fund managers exhibit different strategies in response to the current market conditions, with some actively positioning for buying opportunities while others prefer to shorten duration and enhance liquidity [1] - The People's Bank of China has indicated a commitment to maintaining a moderately loose monetary policy, ensuring ample liquidity in the market, which reduces the likelihood of a significant rise in bond yields [1] Group 2 - The issuance and utilization of government bonds have accelerated this year, with a total of 996 billion yuan in ultra-long special government bonds issued by August 26, achieving a progress rate of 76.6% [2] - Local governments have issued 31,497.6 million yuan in new special bonds, surpassing the issuance scale of the same period last year, which is expected to provide strong support for stable growth [2] - The company bond ETF (511030) has shown a recent price of 106.09 yuan, with a cumulative increase of 1.01% over the past six months [2] Group 3 - The latest scale of the company bond ETF has reached 22.361 billion yuan, with recent fund inflows and outflows remaining balanced [3] - Over the past five trading days, the company bond ETF has attracted a total of 31.8173 million yuan in net inflows, indicating sustained interest from leveraged funds [3] - The company bond ETF has achieved a net value increase of 13.47% over the past five years, with a historical monthly return of up to 1.22% and a 100% probability of profit over a three-year holding period [3][4] Group 4 - The maximum drawdown for the company bond ETF in the past six months was 0.19%, with a relative benchmark drawdown of 0.08% [4] - The management fee for the company bond ETF is set at 0.15%, while the custody fee is 0.05% [5] Group 5 - The company bond ETF has maintained a tracking error of 0.013% this year, closely following the China Bond - Medium to High Grade Corporate Bond Spread Factor Index [6] - The index serves as a performance benchmark for investments in medium to high-grade corporate bonds, with adjustments made quarterly based on market conditions [6]

Market Overview and Analysis - The issuance scale of government bonds, local bonds, and policy financial bonds in the primary market last week was 310.3 billion, 91.4 billion, and 154 billion respectively, with net financing amounts of 214.6 billion, -13.7 billion, and 142.9 billion [1] - Financial bonds (excluding policy financial bonds) totaled an issuance scale of 111.7 billion, with a net financing amount of -19.2 billion. Non-financial credit bonds had an issuance scale of 251.4 billion, with a net financing amount of -9 billion [1] Secondary Market Review - The bond market experienced significant adjustments under weak financial economic data, influenced by factors such as rising anonymous interest rates, the stock-bond relationship, and the progress of US-China negotiations [2] Liquidity Tracking - After the month-end, the funding environment became naturally loose, with the central bank's announcement of a buyout-style reverse repurchase operation supporting new bond issuance. The overnight funding rate briefly fell below 1.3%, further pushing down funding prices. Ultimately, R001 and R007 decreased by 1.3 basis points and 3.3 basis points respectively compared to the previous week [3] Policy and Fundamentals - July economic and financial data indicated that insufficient domestic demand is beginning to exert pressure on economic growth in the second half of the year, with weak real financing demand. High-frequency data shows that production has mostly rebounded month-on-month, while consumption remains low, with food prices declining but industrial product prices rising [4] Overseas Market - Despite a mild performance in the US July CPI, the PPI exceeded expectations, and the unexpected decline in the University of Michigan consumer confidence index for August has led to rising long-term and short-term inflation expectations, maintaining concerns about inflation in overseas markets. The 10-year US Treasury bond closed at 4.33%, up 6 basis points from the previous week [5] Equity Market - The market continued its upward trend this week, with trading volume gradually increasing. The Shanghai Composite Index touched a high of 3700 since 2021, with the Wind All A Index rising by 2.95% during the week. The ChiNext and STAR Market surged by 8.58% and 5.53% respectively. The average daily trading volume for the Wind All A Index remained above 2 trillion. As of August 14, 2025, the financing balance for the Wind All A Index was 2041.039 billion, an increase of 42.131 billion from August 7, indicating a continuous net inflow of financing, particularly focused on the ChiNext and STAR Market [6] Bond Market Strategy Outlook - In an environment of fundamental pressure and weak financing demand, the central bank's liquidity support stance is unlikely to change fundamentally, and continued loose funding is a high-probability event. This is favorable for short-term bonds and certificates of deposit. However, for the long end of the bond market, July financial data indicates a trend of residents shifting deposits. Recent market risk sentiment remains high, and the initiation of a new round of yield decline may require patience until the stock market's rapid rise subsides and the central bank resumes buying and selling government bonds. The period around September 3rd is an important observation point for the stock market, during which more attention should be paid to high-level configurations and maintaining liquidity in the portfolio. In the convertible bond market, valuation is currently a focal point of market debate. The median valuation of convertible bonds has exceeded 130, and as equity strengthens, the number of strong redemption targets will increase, leading to a decrease in relatively high-quality convertible bond targets. High valuations do not necessarily indicate a bearish outlook but suggest a weakening of volatility and risk-return asymmetry, making it more challenging for low-volatility strategy investors to participate. From a beta perspective, convertible bonds are expected to absorb equity elastic funds, and under a low-interest-rate environment, they will not adjust ahead of stocks. In terms of detailed strategy selection, there is still room for bond selection in convertible bonds [7]

Group 1 - The Bond Connect Company reported a total transaction volume of 957.6 billion RMB for July, with an average daily transaction of 41.6 billion RMB [1] - Policy financial bonds and government bonds were the most active, accounting for 51% and 34% of the monthly transaction volume, respectively [1] - ePrime supported 25 offshore bond issuances in July, with a total scale of 28.822 billion RMB, involving underwriters such as Bank of China, CITIC Bank (International), and China Construction Bank (Asia) [1] Group 2 - In the Northbound Swap Connect, there were 1,101 transactions in July, totaling 563.046 billion RMB [1] - As of the end of July, a total of 82 foreign institutions had entered the market [1]

Core Insights - As of the end of July 2025, foreign institutions held 3.93 trillion yuan in the interbank bond market, accounting for approximately 2.3% of the total custody volume in this market [1] - Among the types of bonds held by foreign institutions, government bonds amounted to 2.02 trillion yuan, representing 51.4% of the total, while interbank certificates of deposit and policy financial bonds accounted for 24.9% and 19.3% respectively [1] - In July, three new foreign institutional entities entered the interbank bond market, bringing the total to 1,171 foreign institutions, with 608 entering through direct investment channels and 834 through the "Bond Connect" channel [1] - The trading volume of foreign institutions in the interbank bond market was approximately 1.44 trillion yuan in July, with an average daily trading volume of about 628 billion yuan [1]

Core Insights - As of the end of July 2025, foreign institutions held 3.93 trillion yuan in the interbank bond market, accounting for approximately 2.3% of the total custody volume of the market [1] - Among the types of bonds held by foreign institutions, government bonds amounted to 2.02 trillion yuan, representing 51.4% of the total, while interbank certificates of deposit were 0.98 trillion yuan (24.9%), and policy financial bonds were 0.76 trillion yuan (19.3%) [1] - In July, three new foreign institutional entities entered the interbank bond market, bringing the total to 1,171 foreign institutions, with 608 entering through direct investment channels and 834 through the "Bond Connect" channel [1] - The trading volume of foreign institutions in the interbank bond market in July was approximately 1.44 trillion yuan, with an average daily trading volume of about 628 billion yuan [1]