1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The floating - rate bond market in China entered an expansion cycle again in 2025, but the current stock size is still small. Since June 2025, commercial banks have restarted the issuance of floating - rate bonds, but the scale is small and the liquidity is weak. For investors, the current cost - performance of participating in floating - rate bonds is not high, and the allocation value may be less than that of fixed - rate bonds [2][3][7][8]. 3. Summary According to the Directory 3.1 Domestic Floating - Rate Bond Market Overview - **Definition of Floating - Rate Bonds**: Floating - rate bonds are bonds whose coupon rates are regularly adjusted with the market benchmark interest rate, usually composed of a benchmark interest rate and a fixed spread. The benchmark interest rate is generally linked to DR007, LPR, LIBOR, etc., and the fixed spread is determined at the beginning and remains unchanged subsequently [1][14]. - **Three Expansion Periods of Floating - Rate Bonds**: The domestic floating - rate bond market started in 1995 and has experienced three expansion periods (1995 - 2000, 2003 - 2011, 2014 - 2021), with the scale increasing in each period. From 2022 - 2024, the issuance scale decreased significantly, and in 2025, it entered an expansion cycle again. As of September 12, 2025, the issuance volume reached 26.49 billion yuan [2][15][16]. - **Small Stock Size of Domestic Floating - Rate Bonds**: As of September 12, 2025, the domestic floating - rate bond stock size was 62.16 billion yuan, accounting for only 0.3% of all bond balances. Policy bank bonds are the largest variety, accounting for 80%. The benchmark interest rates are mainly DR007 and LPR, accounting for 49% and 42% respectively [2][26]. 3.2 The Expansion of Commercial Bank Floating - Rate Bonds in 2025 but Weak Liquidity - **Restart of Issuance**: Since June 2025, commercial banks have issued multiple floating - rate bonds with a total issuance scale of 3.89 billion yuan, restarting the issuance after 2013. However, the current scale is small, accounting for only 0.34% of all bank bonds [3][30]. - **Weak Liquidity**: The secondary - market trading activity of commercial bank floating - rate bonds is low. Newly issued floating - rate bonds are more actively traded only in the issuance month, and the trading activity decreases significantly from the next month. Compared with large - bank newly issued fixed - rate commercial financial bonds, the liquidity is significantly weaker [3][32]. 3.3 How to Price Commercial Bank Floating - Rate Bonds? - **Complex Pricing**: Different from fixed - rate bonds priced by YTM, floating - rate bonds have non - fixed coupon rates, and it is difficult to accurately predict future cash flows, so the pricing is more complex. The daily price fluctuation of floating - rate bonds is mainly affected by the current benchmark interest rate and the yield to maturity [4][37]. - **Price Change Rules**: From the perspective of absolute value, when the benchmark interest rate and the yield to maturity change in opposite directions, the change direction of the floating - rate bond value is clear. In practice, the more volatile variable often determines the direction of investment returns. From the perspective of relative value, floating - rate bonds can resist the price callback caused by tightening of the money market or interest rate hikes, but perform worse than fixed - rate bonds during the period of loose money and interest rate cuts [4][41][49]. 3.4 The Current Allocation Value of Commercial Bank Floating - Rate Bonds May Be Less Than That of Fixed - Rate Bonds - **Banks' Motivation for Issuance**: Since the second half of this year, commercial banks have issued a large number of floating - rate bonds, possibly to reduce the cost of their liability side. Affected by multiple factors, the net interest margin of commercial banks has been in a downward channel, and the demand for cost reduction on the liability side remains [7][56]. - **Low Cost - Performance for Investors**: For investors, the cost - performance of participating in floating - rate bonds is not high. On the one hand, the characteristics of floating - rate bonds make them more suitable for short - term trading, and the trading difficulty is large. On the other hand, in the current market environment of expected interest rate cuts, the allocation value of floating - rate bonds may be less than that of fixed - rate bonds [7][8][59].

Investment Rating - The report maintains a "Recommendation" rating for the banking industry [1] Core Insights - The report highlights a decline in bill rates and emphasizes the importance of large maturing certificates of deposit [5][11] - The central bank's actions include a net injection of 656.6 billion yuan through reverse repos, indicating a focus on liquidity management [12][33] - The report anticipates significant pressure on the funding environment in June due to the maturity of over 40 billion yuan in certificates of deposit and 12 billion yuan in reverse repos [12][16] Summary by Sections Industry Scale - The banking sector comprises 41 companies with a total market capitalization of 991.12 billion yuan, representing 11.6% of the market [1] Bill Rates - As of the end of May, the 1-month, 3-month, and 6-month bill rates were 1.1%, 1.16%, and 1.06%, reflecting changes of -8 basis points, +7 basis points, and -3 basis points respectively [11][19] - The net buying of bills by state-owned banks reached 1,537.018 billion yuan, slightly higher than the previous year's figure [11][19] Monetary Policy - The central bank conducted 16.026 billion yuan in 7-day reverse repos at an interest rate of 1.40%, with a net injection of 656.6 billion yuan [12][33] - The report notes that the central bank's reverse repo balance has significantly increased compared to historical levels [12][36] Fiscal Insights - The government bond net financing for the week was 514.104 billion yuan, with expectations of a slight decrease in net payments in the upcoming period [14] Certificates of Deposit - The report indicates that June will see a record maturity of over 40 billion yuan in certificates of deposit, which is the largest single-month maturity in history [16] - The large maturities are expected to impact the stability of the funding environment but will also allow for a shift from unstable to more stable liabilities [16] Commercial Bank Financing - The total bond issuance by commercial banks was 762.2 billion yuan, with a net financing scale of 59.3 billion yuan [17]