1. Report Industry Investment Rating No information about the report industry investment rating is provided in the given content. 2. Core Viewpoints of the Report - The long - end of secondary capital bonds and perpetual bonds showed significant strength last week, with the long - end yield decline more prominent than the short - end. The short - end yield of secondary and perpetual (二永) bonds has been at a historical low, making further decline difficult. Institutions started to bet on medium - and long - duration bonds, with the 7 - year bond being the most favored. The 7 - year spread quantile is still relatively high, indicating potential for further betting [2][9][10]. - The curves of general credit bonds and urban investment bonds have flattened. The general credit bond curve shows characteristics of "flattened short - end, steepened middle - section, and declined long - end", while the urban investment bond curve shows "flattened short - end, locally steepened middle - section, and differentiated long - end" [3][11][13]. - In terms of trading volume, short - end trading volume increased, while the trading volume of general credit bonds decreased slightly. High - yield urban investment bond trading was mainly concentrated in regions such as Beijing, Shandong, Hunan, and Guangdong [15][17][22]. - In primary issuance, the net financing of urban investment bonds in general credit bonds recovered significantly, while the net financing of financial bonds showed a significant outflow, and the net financing of science and technology innovation bonds was negative [23][26][29]. 3. Summary According to the Directory 3.1 Secondary Market: The Short - and Medium - end Remains Steep, and the Trading Volume is Generally Stable 3.1.1 Market Trends: The Long - end of Secondary and Perpetual Bonds Strengthened Significantly, and the General Credit Bond Curve Flattened - **Secondary Capital Bonds**: Yields across all tenors declined, with the long - end performing better. The 7 - year and 10 - year quantiles dropped significantly. Credit spreads across all tenors narrowed, with the long - end compression more significant. The short - and medium - end of the term spread flattened, while the long - end (10Y - 7Y) became steeper, and the curve's long - end structural bulge still exists [2][9]. - **Perpetual Bonds**: The yield trend was similar to that of secondary capital bonds. The 4 - 7 - year yield decline was greater, and the 7 - year spread decreased by 7.3bp. The 4Y - 3Y term spread decreased by over 3bp, and its quantile dropped by nearly 15 percentage points [10]. - **General Credit Bonds**: Yields across all tenors declined, with the long - end decline being the largest. Spreads generally compressed, with the short - end showing small fluctuations and the long - end quantiles dropping significantly. The curve showed differentiation, with the short - end flattening, the middle - section steepening slightly, and the long - end declining [11][12]. - **Urban Investment Bonds**: Yields across all tenors generally declined, with the long - end decline more prominent. Spreads mainly compressed, with the long - end compression more significant. The curve structure was differentiated, with the short - end flattening, the middle - section locally steepening, and the long - end slightly rising [13]. 3.1.2 Trading Volume: Short - end Trading Volume Increased, and General Credit Bond Trading Volume Declined Slightly - **Secondary and Perpetual Bonds**: The total trading volume of secondary and perpetual bonds decreased. For secondary capital bonds, the trading volume of the short - end (within 1 year) increased significantly, while that of some medium - and long - term tenors decreased. For perpetual bonds, the trading volume also decreased, with the short - end trading volume increasing [15][16]. - **General Credit Bonds**: The total trading volume of general credit bonds decreased slightly. Among them, the trading volume of industrial bonds increased, while that of urban investment bonds and quasi - urban investment bonds decreased. The trading volume of different tenors within each category showed different trends [17][18]. - **High - Yield Urban Investment Bonds**: Trading was mainly concentrated in regions such as Beijing, Shandong, Hunan, and Guangdong, with cities like Beijing, Zhangjiajie, Qingdao, Xiamen, Jinan, and Weifang having relatively high trading volumes [22]. 3.2 Primary Issuance: The Net Financing of Urban Investment Bonds Recovered Significantly, and the Net Outflow of Financial Bonds was Obvious - **General Credit Bonds**: The total issuance last week was about 441.9 billion yuan, a year - on - year increase of about 150 billion yuan. The net financing was about 120.7 billion yuan, a year - on - year increase of about 167.7 billion yuan. The net financing of urban investment bonds recovered significantly, while that of industrial bonds decreased significantly [23]. - **Financial Bonds**: The total issuance last week was about 20.3 billion yuan, a year - on - year decrease of about 131.3 billion yuan. The net financing was about - 101.7 billion yuan, a year - on - year decrease of about 202.4 billion yuan. The issuance of securities company bonds, perpetual bonds, and commercial financial bonds declined significantly [26]. - **Science and Technology Innovation Bonds**: The issuance last week was about 41.1 billion yuan, a year - on - year increase of about 27.4 billion yuan. The net financing was about - 19.3 billion yuan, a year - on - year decrease of about 27.3 billion yuan [29].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In April, the buying power of credit bonds may increase, and it is advisable to attack appropriately. One can layout curve convex points, dig into the spreads of perpetual bonds to increase returns, and pay attention to the relatively high cost - performance of 2Y and 4Y secondary perpetual bonds while being aware of the large - scale redemption risk of fixed - income plus products [1][4]. - The yields of urban investment bonds generally declined, with short - duration and medium - low - rated bonds performing better [42]. - The supply of industrial bonds increased, and the proportion of medium - and long - term issuances rose [56]. - The net financing of bank secondary perpetual bonds was negative, and most spreads widened passively [64]. 3. Summary by Directory 3.1 4月信用债买盘力量或上升，适当进攻 3.1.1 布局凸点、挖掘永续品种利差增厚收益 - In March, the bond market showed a structural market of "narrow - range fluctuations in long - term interest rates, short - term strength and long - term weakness, and a steeper curve". The yields of credit bonds generally declined, and the credit spreads of most within - 5 - year bonds widened passively, while those of 7 - year and 10 - year bonds narrowed [9]. - The incremental demand for credit bond allocation in March mainly came from funds and other products, with the duration concentrated within 3 years [10]. - As of March 27, the yields and credit spreads of credit bonds were generally low, and the carry - trade space of medium - and short - duration credit bonds was significantly compressed [11]. - In April, the bond market may remain volatile. The increase in the scale of wealth management products may drive up the demand for credit bond allocation. One can layout curve convex points to increase returns through riding and dig into the spreads of perpetual bonds [15]. - For medium - and short - duration bonds, urban investment bonds with AA rating for 2 - year and 4 - year terms and AA(2) rating for 2 - 3 - year terms have relatively high cost - performance. High - rated 6 - 7Y bonds are convex points, and one can play with small positions in 5 - 7 - year bonds with an implied rating of AA+ and above [18][21]. - As of March 27, the outstanding scale of public perpetual bonds was 3.53 trillion yuan, and there is still room to dig into the spreads of perpetual bonds. One can actively dig into the spreads of perpetual bonds and wait for the spread compression market [23]. 3.1.2 二永债2Y和4Y性价比较高，关注固收+大额赎回风险 - In March, the yields of secondary perpetual bonds generally declined, and the credit spreads mostly widened passively. The 2 - 3 - year bonds performed weaker. The cost - performance of 2Y and 4Y secondary perpetual bonds has recovered [27]. - The divergence in institutional behavior has increased. Funds "chased up and sold down". The demand for secondary perpetual bonds from wealth management products was relatively stable, and insurance and other institutions have been net buyers in the secondary market in recent weeks [28]. - In April, the buying power of credit bonds is strong, and high - coupon assets may be favored. The 2Y and 4Y secondary perpetual bonds have relatively high cost - performance. However, one needs to be vigilant against the risk of secondary perpetual bond adjustment caused by the redemption of fixed - income plus products [32][35]. 3.2 城投债：收益率普遍下行，短久期、中低评级表现更好 - In March, the net financing of urban investment bonds was positive and increased year - on - year. The proportion of medium - and long - term issuances increased, and the weighted average issuance interest rates generally declined [42]. - The net financing performance of urban investment bonds varied by province, with about two - thirds of the provinces having positive net financing [44]. - In March, the yields of urban investment bonds generally declined, with short - duration and medium - low - rated bonds performing better. The credit spreads showed differentiation [46]. - The buying sentiment of urban investment bonds continued to pick up in March. The proportion of TKN and low - valuation transactions increased slightly compared with February. The trading activity of medium - and long - term bonds and medium - and low - grade bonds increased [53]. 3.3 产业债：供给放量，中长久期发行占比增加 - In March, the issuance and net financing scale of industrial bonds increased significantly year - on - year. The proportion of medium - and long - term issuances increased, and the issuance interest rates of medium - and short - duration bonds declined [56]. - In March, the yields of industrial bonds declined across the board, with medium - and short - duration and low - grade bonds performing better. The credit spreads showed differentiation [58]. - The yields of public bonds in various industries declined by 7 - 17bp. The 2 - year - and - within bonds and 2 - 3 - year AA bonds performed better [61]. 3.4 银行二永债：净融资为负，利差大多被动走扩 - Since 2026, there has been no new issuance of secondary perpetual bonds. In March, the secondary capital bonds and perpetual bonds were redeemed by 284 billion yuan and 397 billion yuan respectively, with a total net financing of - 681 billion yuan, a year - on - year decrease of 727 billion yuan [64]. - In March, the yields of bank secondary perpetual bonds generally declined, with short - duration and low - rated bonds performing better. Most credit spreads widened passively, and some bonds outperformed or underperformed general credit bonds [66]. - From the perspective of broker transactions, in March, the proportion of TKN transactions in secondary capital bonds and perpetual bonds remained basically the same, and the proportion of low - valuation transactions slightly decreased. The trading of large - bank secondary capital bonds extended the duration, while that of large - bank perpetual bonds shortened the duration. The trading sentiment of city - commercial bank secondary perpetual bonds improved [71].

Report Industry Investment Rating - The report does not mention the industry investment rating [1] Core Viewpoints - Multiple regulatory indicators form the "fence" for banks' allocation behavior, and banks' "choices" within these fences determine their asset allocation structure [1][3][24] Summary by Relevant Catalog 1. Fence Within: How Regulatory Constraints Determine Banks' Bond Market Choices - **"Ballast Stone" Status of Bank Allocation in the Bond Market**: As the main bond allocators in the bond market, commercial banks' "ballast stone" status is rooted in three logics: scale dominance, counter - cyclical characteristics, and stability under regulatory constraints. As of the end of February 2026, commercial banks' bond allocation in the inter - bank market was 82.16 trillion yuan, ranking first among various institutions, mainly investing in interest - rate bonds. Their counter - cyclical allocation provides a buffer for the market, and regulatory constraints make them natural buyers of interest - rate bonds [2][17][18] - **Commercial Bank Regulation: Macro - Prudential + Micro - Constraints**: Understanding banks' bond allocation behavior requires understanding their regulatory constraints, including the Macro - Prudential Assessment System (MPA), interest - rate risk indicators (ΔEVE/NII), liquidity risk indicators (LCR/NSFR), and capital adequacy ratio. These indicators form the "fence" for banks' allocation behavior [3][24] 2. Central Bank MPA: From Broad Credit to Bond Allocation - **Overview of MPA Indicator System**: MPA reshapes banks' bond - allocation behavior in three dimensions: total amount, structure, and timing. In terms of total amount, the broad - credit growth constraint makes bond investment a "regulatory item" after loan issuance. Structurally, capital - adequacy pressure forces banks' self - operated funds to concentrate on interest - rate bonds with zero risk - weight. Temporally, liquidity assessment indicators create a rigid "quarter - end effect". Under these constraints, banks' self - operated bond - allocation behavior shows characteristics of "quota restricted by credit, concentration on interest - rate bonds, and rhythm restricted by quarter - ends" [4][29] - **Three Transmission Paths of MPA on Banks' Bond Allocation**: - **Broad - Credit Growth Constraint → Limited Bond Allocation Quota**: The upper limit of broad - credit growth locks the growth rate of bond investment, squeezing out bond allocation when loan growth is fast, especially at quarter - ends [32][33] - **Capital - Adequacy Constraint → Decreased Risk Appetite + Increased Supply of Capital Instruments**: To meet capital - adequacy requirements, banks issue secondary - capital bonds and perpetual bonds and increase the allocation of low - capital - occupancy interest - rate bonds while reducing high - capital - occupancy credit bonds. In a period of strict capital regulation, the spread between interest - rate bonds and credit bonds tends to widen [34] - **Liquidity Indicator Constraint → Quarter - End Fund Pulse + Solidified Maturity Preference**: LCR assessment tightens the quarter - end capital market and releases concentrated demand for interest - rate bonds. NSFR constraint restricts banks from lending to non - bank institutions at quarter - ends, inhibits excessive maturity mismatch, and solidifies banks' preference for short - term bonds or long - term interest - rate bonds [35] 3. Triple Constraints of the Banking Risk Supervision System under the Financial Regulatory System - **Capital - Adequacy Constraint: Risk Weights Guide Allocation**: Capital - adequacy ratio is the core regulatory indicator. Risk weights determine the capital occupancy of bonds, and banks prefer bonds with lower risk weights. The investment priority of bond types is: treasury bonds, policy - financial bonds > local - government bonds > general - credit bonds, commercial - financial bonds > secondary - capital bonds > perpetual bonds. When capital adequacy is under pressure, banks compress high - weight assets, and the regulatory rating affects business qualifications and asset structure. Capital - supplement pressure increases the supply of capital instruments [37][44][45] - **Liquidity Risk Indicators: LCR and NSFR's "Rigid Demand" for High - Liquidity Assets**: The core goal of liquidity - risk supervision is to guide banks to match the maturity structure of assets and liabilities. LCR and NSFR are the two pillars. Different bonds have different conversion rates in HQLA and RSF coefficients, which affect banks' bond - type preferences. The comprehensive impact includes a significant quarter - end effect, solidified maturity preference, and structural differentiation [47][51][57] - **Interest - Rate Risk Supervision Indicators: How ΔEVE and ΔNII Constrain Allocation Maturity**: ΔEVE measures the maximum loss of the net present value of banks' assets and liabilities under different interest - rate shocks, and ΔNII measures the impact of interest - rate changes on net interest income. These two indicators jointly restrict large domestic banks' long - bond allocation. Banks tend to "buy short and sell long" to control bond maturity [58][59][60]

Summary of Key Points from Conference Call Records Industry Overview - The discussion primarily revolves around the Chinese bond market and its dynamics leading into 2026, with a focus on interest rates, supply-demand relationships, and investment strategies. Core Insights and Arguments 1. **Long-term Interest Rate Trends**: It is anticipated that the long-term downward trend in interest rates will continue, with the 10-year government bond yield likely to fall below 1% by 2035 due to factors such as population aging and high leverage ratios [2][10]. 2. **Impact of Financing Costs on Corporate Profitability**: Despite a reduction in financing costs by approximately 200 basis points from 2021 to 2025, corporate profits have declined by 15%, indicating that lower interest rates have not significantly improved profitability [3][10]. 3. **Supply-Demand Dynamics in 2026**: The bond market is expected to shift from a state of oversupply to a phase of temporary undersupply, driven by a projected increase in bank self-operated bond investment demand by 16 trillion yuan [6][7]. 4. **Investment Strategy Recommendations**: The suggested strategy is to focus on long-duration bonds, particularly 30-year government bonds, as short-term bonds are becoming less attractive due to low yield and limited capital gain potential [4][9]. 5. **Monetary Policy Outlook**: The central bank is likely to maintain a loose monetary policy, focusing more on domestic demand rather than supply-side price fluctuations, with interest rate cuts expected to occur later but with a clear direction [5][9]. 6. **Changes in Bond Market Supply**: The total supply of bonds in 2026 is projected to remain stable at around 20 trillion yuan, with a potential decrease in the actual supply of long-term bonds due to local government debt issuance strategies [6][7]. 7. **Banking Sector Dynamics**: The demand for bonds from banks is expected to increase as their funding costs decrease, with some banks' costs dropping below 1.1%, enhancing their capacity to invest in long-duration assets [6][7]. 8. **Investment Opportunities in Long-term Bonds**: There is a favorable window for investing in 30-year government bonds, with expectations of a potential yield decline of about 20 basis points in the second half of the year [4][9]. Other Important but Possibly Overlooked Content 1. **Population and Leverage as Long-term Constraints**: The aging population and high leverage ratios are identified as critical long-term factors that will continue to exert downward pressure on interest rates [2][10]. 2. **Market Sentiment Shifts**: There is a noted shift in market sentiment, with a reduction in bearish views on the bond market, suggesting a potential recovery in bond investment interest [4][7]. 3. **Insurance Fund Investment Patterns**: The pace of insurance funds' bond investments is expected to stabilize, with a potential increase in demand for long-term bonds as market conditions evolve [8]. This comprehensive summary encapsulates the key points discussed in the conference call, providing insights into the future of the Chinese bond market and investment strategies.

1. Report's Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - The bond market continued its volatile recovery, with medium - to long - term credit bonds performing strongly, and credit spreads showed different trends across various bond types [2][3] - Credit bond yields declined following interest rates, and medium - and long - term credit spreads compressed [3][10] - Most urban investment bond spreads decreased by 1 - 2BP, while spreads of private and mixed - ownership real - estate industrial bonds continued to widen [4][15] - Most yields of secondary and perpetual bonds declined, and medium - to long - term varieties performed strongly [4][33] - The excess spreads of industrial perpetual bonds increased slightly, while those of urban investment perpetual bonds remained generally stable [5][35] 3. Summary by Relevant Catalog 3.1 Credit Bond Yields Follow Interest Rates Down, and Medium - and Long - Term Credit Spreads Compress - From March 23 to March 27, bond interest rates declined slightly overall. The yields of 1Y, 3Y, 5Y, and 10Y China Development Bank bonds decreased by 1BP, while the 7Y yield increased by 1BP [10] - Credit bond yields generally declined following interest rates. Bonds with a term of over 3Y performed strongly. For 1Y bonds, yields of AA and above grades decreased by 0 - 1BP, while the AA - grade yield increased by 3BP. Similar trends were observed for other terms [10] - Medium - and long - term credit spreads compressed, with different trends for different grades and terms. Rating spreads and term spreads also showed various changes [10] 3.2 Most Urban Investment Bond Spreads Decrease by 1 - 2BP - For external ratings, spreads of AAA and AA + grade urban investment platforms were mostly flat or decreased by 1 - 2BP compared to last week. Some regions had specific changes, such as a 3BP decrease in Liaoning and Inner Mongolia for AAA platforms [15] - AA - grade platform spreads mostly decreased by 1 - 3BP, with specific regional differences [15] - By administrative level, spreads of provincial, prefecture - level, and district - level platforms generally decreased by 1 - 2BP, with some regions showing larger changes [19] 3.3 Most Industrial Bond Spreads Decrease, while Spreads of Private and Mixed - Ownership Real - Estate Bonds Continue to Widen - Central and state - owned enterprise real - estate bond spreads decreased by 1 - 3BP, private real - estate bond spreads increased by 3BP, and mixed - ownership real - estate bond spreads increased by 51BP [25] - Spreads of coal bonds of AAA, AA +, and AA grades decreased by 2BP, 1BP, and 5BP respectively. Spreads of AAA - grade steel bonds decreased by 1BP, and AA + remained flat. Spreads of AAA and AA + grade chemical bonds both decreased by 1BP [25] 3.4 Most Yields of Secondary and Perpetual Bonds Decline, and Medium - to Long - Term Varieties Perform Strongly - For 1Y secondary and perpetual bonds, yields decreased by 0 - 1BP, and spreads were mostly flat or increased by 1BP. For other terms, yields and spreads showed different trends, with medium - to long - term yields generally decreasing and spreads compressing [33] 3.5 Excess Spreads of Industrial Perpetual Bonds Increase Slightly, while Those of Urban Investment Perpetual Bonds Remain Generally Stable - The excess spread of industrial AAA - grade 3Y perpetual bonds increased by 0.52BP to 9.48BP, reaching the 15.55% quantile since 2015. The excess spread of industrial 5Y perpetual bonds increased by 0.01BP to 13.21BP, reaching the 36.24% quantile [35] - The excess spread of urban investment AAA - grade 3Y perpetual bonds decreased by 0.05BP to 7.01BP, reaching the 15.77% quantile. The excess spread of urban investment 5Y perpetual bonds increased by 0.29BP to 10.93BP, reaching the 21.64% quantile [35] 3.6 Credit Spread Database Compilation Instructions - Market - wide credit spreads, commercial bank secondary and perpetual spreads, and urban investment/industrial perpetual bond credit spreads are calculated based on ChinaBond medium - and short - term note and ChinaBond perpetual bond data, with historical quantiles starting from the beginning of 2015 [37] - Urban investment and industrial bond - related credit spreads are compiled and statistically analyzed by the Huafu Securities Research Institute, with historical quantiles starting from the beginning of 2015 [37] - The calculation methods for individual bond credit spreads, bank secondary capital bond/perpetual bond excess spreads, and industrial/urban investment perpetual bond excess spreads are provided, along with sample screening criteria [39]

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責，對其 準確性或完整性亦不發表任何聲明，並明確表示，概不就因本公告全部或任何部分內容 而產生或因倚賴該等內容而引致的任何損失承擔任何責任。 BANK OF CHONGQING CO., LTD.* 重慶銀行股份有限公司* （ 於 中 華 人 民 共 和 國 註 冊 成 立 的 股 份 有 限 公 司 ） （股份代號：1963） 海外監管公告 本公告乃重慶銀行股份有限公司*（「本行」）根據香港聯合交易所有限公司證券上市規則第 13.10B條而作出。 茲載列本行在上海證券交易所網站刊發之《2025年度財務報表及審計報告》，僅供參閱。 代表董事會 重慶銀行股份有限公司* 董事長 楊秀明 中國重慶，2026年3月24日 於本公告刊發日期，本行的執行董事為楊秀明先生、高嵩先生及侯曦蒙女士；本行的非 執行董事為黃漢興先生、郭喜樂先生、吳珩先生、付巍先生、周宗成先生及余華先生； 本行的獨立非執行董事為朱燕建先生、劉瑞晗女士、汪欽琳女士、曾宏先生及陳鳳翔先 生。 * 本行經中國銀行業監督管理機構批准持有B0206H250000001號金融許可證，並經重慶市 ...

1. Report Industry Investment Rating No relevant information provided. 2. Core Viewpoints of the Report - The mid - long - end of Tier 2 capital bonds and perpetual bonds of banks has recovered, and the curve of ordinary and perpetual bonds continues to steepen. The 2 - 3 - year ordinary and perpetual bonds are more favored by institutions. Considering the unclear geopolitical conflict pattern and inflation concerns, the 3Y - 2Y interval can be used as a key allocation area in the future [2][3][17]. - The trading volume of mid - long - term Tier 2 capital bonds and perpetual bonds has decreased, while the trading volume of urban investment bonds has increased significantly, driving the overall increase in the trading volume of ordinary and perpetual bonds [18][21]. - In primary issuance, the issuance of industrial bonds has increased, while the issuance of Tier 2 capital bonds and perpetual bonds remains at a low level. The issuance of science and innovation bonds has decreased compared with the previous period but still shows a significant year - on - year increase [26][29][30]. 3. Summary According to the Directory 3.1 Secondary Market: Divergent Trends of Tier 2 Capital Bonds and Perpetual Bonds, and an Increase in the Trading Volume of Urban Investment Bonds 3.1.1 Market Trends - **Tier 2 Capital Bonds**: The yields of all maturities have generally declined, with the mid - long - end declining more than the short - end. The spreads have been comprehensively compressed, and the curve shows a co - existence of local steepening in the middle and flattening at the long - end [9]. - **Perpetual Bonds**: The yield and spread trends are similar to those of Tier 2 capital bonds. The 2 - 3 - year maturity has relatively high cost - effectiveness, while the long - term bonds are more volatile [10]. - **Ordinary and Perpetual Bonds**: The curve steepening is further strengthened. The yields of 1 - 5 - year maturities generally decline, and the long - end steepening is more significant [13][14]. - **Urban Investment Bonds**: The yields of all maturities generally decline, and the curve steepening trend continues. The 2 - 3 - year maturity has a relatively large decline in yield [16]. 3.1.2 Trading Volume - **Tier 2 Capital Bonds and Perpetual Bonds**: The trading volume of mid - long - term bonds has decreased. The total trading volume of Tier 2 capital bonds has decreased by about 279 billion yuan, and that of perpetual bonds has decreased by about 252 billion yuan [18]. - **Ordinary and Perpetual Bonds**: The total trading volume has increased significantly, with an increase of more than 260 billion yuan. The trading volume of industrial bonds, urban investment bonds, and quasi - urban investment bonds has all increased to varying degrees [21]. - **High - Yield Urban Investment Bonds**: The high - yield trading last week was mainly concentrated in Shandong, Beijing, Sichuan, Fujian, Guizhou, Jiangxi and other places [25]. 3.2 Primary Issuance: Increased Issuance of Industrial Bonds, and Low - level Issuance of Tier 2 Capital Bonds and Perpetual Bonds - **Ordinary and Perpetual Bonds**: The total issuance last week was about 397 billion yuan, with a net financing of about 117 billion yuan. The issuance of industrial bonds has increased significantly, and the issuance of urban investment bonds has increased slightly [26]. - **Financial Bonds**: The total issuance last week was about 50.2 billion yuan, with a net financing of about 2.4 billion yuan. The issuance of securities company bonds is still the main force, and the issuance of Tier 2 capital bonds, commercial financial bonds, and TLAC non - capital bonds remains at a low level [29]. - **Science and Innovation Bonds**: The issuance last week was about 58.4 billion yuan, with a net financing of about 42.1 billion yuan. Although the issuance and net financing scale have declined compared with the previous period, they still show a significant year - on - year increase [30].

Report Industry Investment Rating No information provided in the report. Core Viewpoint The interest rate curve continues to steepen, with the spreads of short - and medium - term low - quality bonds compressing. The spreads of most urban investment bonds decline slightly, the spreads of industrial bonds generally decline slightly, but the spreads of mixed - ownership real estate bonds rebound. The yields of secondary and perpetual bonds decline across the board, and the spreads of 10Y bonds converge significantly. The excess spreads of 3Y industrial perpetual bonds converge, while the excess spreads of urban investment bonds widen [3][4][5]. Summary by Directory 1. Interest rate curve continues to steepen, short - and medium - term low - quality spreads compress - From March 16th to March 20th, short - and medium - term interest - rate bonds generally oscillated downward, long - term bonds remained weak, and the interest rate curve further steepened. The yields of 1Y, 3Y, 5Y, and 7Y China Development Bank bonds decreased by 2BP, while the yield of 10Y bonds increased by 1BP [10]. - Credit bonds also showed the characteristics of strong short - end and weak long - end. The yields of AA and above - grade 1Y credit bonds decreased by 2 - 3BP, and the yield of AA - grade bonds decreased by 5BP; the yields of AA+ and above - grade 3Y credit bonds decreased by 2BP, and the yields of AA and below - grade bonds decreased by 4BP; the yields of all grades of 5Y bonds remained flat; the yields of AA+ and above - grade 7Y bonds decreased by 1BP, and the AA - grade yield remained flat; the yields of all grades of 10Y bonds increased by 1BP [10]. - The spreads of short - and medium - duration low - quality varieties compressed. The spread of 1Y AAA - grade bonds remained flat, the spreads of AA+ and AA grades converged by 1BP, and the AA - grade spread compressed by 3BP; the spreads of AA+ and above - grade 3Y bonds remained flat, and the spreads of AA and AA - grades converged by 2BP; the spreads of all grades of 5Y bonds widened by 2BP; the spreads of all grades of 7Y bonds widened by 1 - 2BP; the spreads of 10Y bonds widened by 1BP [10]. 2. The spreads of most urban investment bonds decline slightly by 1BP - The spreads of external - rated AAA, AA+, and AA urban investment platforms generally decreased by 1BP compared with last week. In different regions, most spreads decreased by 0 - 1BP. Among AAA platforms, Inner Mongolia's spread decreased by 3BP; among AA+ platforms, Hainan's spread remained flat, Inner Mongolia's spread increased by 1BP, Tianjin, Gansu, and Ningxia's spreads decreased by 2BP, and Yunnan's spread decreased by 4BP; among AA platforms, the spreads of Shanghai and Shaanxi decreased by 2 - 3BP [15]. - In terms of administrative levels, the spreads of provincial, municipal, and district - county platforms generally decreased by 1BP. Specifically, among provincial platforms, Shandong's spread decreased by 2BP, and Inner Mongolia's spread decreased by 4BP; among municipal platforms, the spreads of Shaanxi, Ningxia, and Yunnan decreased by 2 - 3BP; among district - county platforms, Guizhou's spread decreased by 3BP [19]. 3. The spreads of industrial bonds generally decline slightly, and the spreads of mixed - ownership real estate bonds rebound - This week, the spreads of industrial bonds generally declined slightly, while the spreads of mixed - ownership real estate bonds rebounded. The spreads of central and state - owned enterprise real estate bonds converged by 1BP, the spreads of private real estate bonds converged by 2BP, and the spreads of mixed - ownership real estate bonds widened by 20BP. The spreads of Longhu converged by 2BP, Midea Real Estate converged by 3BP, Vanke's spread widened by 221BP, Huafa's spread widened by 9BP, and Poly's spread converged by 1BP [25]. - The spreads of AA+ - grade coal bonds converged by 4BP, and the spreads of other grades converged by 1BP; the spreads of AAA - grade steel bonds converged by 1BP, and the spreads of AA+ - grade steel bonds converged by 4BP; the spreads of AAA and AA+ - grade chemical bonds both converged by 1BP. The spreads of Shaanxi Coal and HBIS converged by 1BP, and the spread of Jinneng Coal Industry converged by 2BP [25]. 4. The yields of secondary and perpetual bonds decline across the board, and the spreads of 10Y bonds converge significantly - The yields of secondary and perpetual bonds declined across the board, and the spreads of 10Y bonds converged significantly. Specifically, the yields of all grades of 1Y secondary capital bonds decreased by 1 - 2BP, and the spreads widened by 0 - 1BP; the yields of all grades of perpetual bonds decreased by 2BP, and the spreads remained flat. The yields of all grades of 3Y secondary and perpetual bonds decreased by 3BP, and the spreads converged by 1BP; the yields of all grades of 5Y secondary capital bonds and AAA - grade perpetual bonds decreased by 1 - 2BP, and the spreads widened by 1 - 2BP, while the yields of AA+ and AA - grade perpetual bonds decreased by 3 - 4BP, and the spreads converged by 1 - 2BP; the yields of all grades of 10Y secondary and perpetual bonds decreased by 2 - 3BP, and the spreads converged by 2 - 3BP [32]. 5. The excess spreads of 3Y industrial perpetual bonds converge, and the excess spreads of urban investment bonds widen - This week, the excess spreads of 3Y industrial AAA - grade perpetual bonds converged by 1.01BP to 8.96BP, reaching the 10.86% quantile since 2015. The excess spreads of 5Y industrial perpetual bonds remained the same as last week at 13.20BP, reaching the 33.02% quantile since 2015. The excess spreads of 3Y urban investment AAA - grade perpetual bonds widened by 1.00BP to 7.06BP, reaching the 15.92% quantile; the excess spreads of 5Y urban investment perpetual bonds widened by 0.56BP to 10.64BP, reaching the 18.71% quantile [35]. 6. Credit spread database compilation instructions - The overall market credit spreads, commercial bank secondary and perpetual spreads, and urban investment/industrial perpetual bond credit spreads are calculated based on ChinaBond medium - and short - term notes and ChinaBond perpetual bonds data, with historical quantiles starting from the beginning of 2015. The credit spreads related to urban investment and industrial bonds are sorted and counted by Huafu Securities Research Institute, with historical quantiles starting from the beginning of 2015 [37]. - The credit spreads of industrial and urban investment individual bonds = the ChinaBond valuation (exercise) of individual bonds - the yield to maturity of the same - term China Development Bank bonds (calculated by linear interpolation method), and finally the credit spreads of the industry or regional urban investment are obtained by the arithmetic average method. The excess spreads of bank secondary capital bonds/perpetual bonds = the credit spreads of bank secondary capital bonds/perpetual bonds - the credit spreads of bank ordinary bonds of the same grade and term. The excess spreads of industrial/urban investment perpetual bonds = the credit spreads of industrial/urban investment perpetual bonds - the credit spreads of medium - and short - term notes of the same grade and term [39]. - Sample screening criteria: Both industrial and urban investment bonds select medium - term notes and public - offering corporate bonds as samples, and exclude guaranteed bonds and perpetual bonds. If the remaining term of an individual bond is less than 0.5 years or more than 5 years, it will be excluded from the statistical sample. Industrial and urban investment bonds are all externally - rated by the issuer, while commercial banks use ChinaBond implicit bond ratings [39].

Core Viewpoint - The Financial Regulatory Administration has reiterated the importance of diversifying capital supplementation for small and medium-sized financial institutions, indicating a strong policy signal to address the urgent need for capital enhancement in these institutions to mitigate financial risks [1][2]. Regulatory Focus on Capital Supplementation - The Financial Regulatory Administration has outlined a plan to promote capital supplementation for state-owned commercial banks and explore diversified methods for small and medium-sized financial institutions [2]. - This follows a series of discussions in previous years regarding the need for small banks to supplement their capital through various channels, with a renewed emphasis in 2025 on categorically addressing risks through capital supplementation, mergers, and market exits [2]. Factors Necessitating Capital Supplementation - Four key factors have driven the need for capital supplementation in small banks: 1. Capital adequacy ratios of small banks are consistently below the industry average, with some nearing regulatory limits [3]. 2. A narrowing net interest margin has weakened the internal capital generation capacity of these banks [3]. 3. The acceleration of industry consolidation and mergers in 2026 necessitates adequate capital for participation [3]. 4. The successful capital supplementation of large state-owned banks through special government bonds has created a precedent for similar actions for small banks [3]. Current Capital Supplementation Efforts - Over 40 small banks have actively sought to increase their registered capital through various means, including cash injections and capital reserves, as of March 18 this year [5]. - Notable capital increases include Shanxi Bank with over 1.4 billion yuan and several others exceeding 100 million yuan [6]. Effectiveness of Capital Supplementation Channels - Cash injections and targeted share placements are considered the most effective methods for capital supplementation, as they directly increase core tier one capital [7]. - The introduction of new shareholders or additional contributions from existing shareholders through cash injections is highlighted as a significant method for enhancing capital [7]. Potential for Special Bonds - There is a growing discussion around the regular issuance of local government special bonds to support capital supplementation for small banks, with suggestions for a structured approach at the provincial level [8]. - The use of special bonds for capital supplementation has been previously sanctioned, with 5.5 billion yuan issued from 2020 to 2022 for this purpose [8]. Challenges and Future Outlook - The likelihood of fully normalizing special bonds for capital supplementation is considered limited due to concerns over fiscal and financial risks [9]. - However, recent examples, such as the issuance of 26 billion yuan in special bonds by Jilin Province to support local banks, indicate a potential shift towards more structured support mechanisms [9]. - The regulatory environment is expected to evolve, potentially expanding the scope and purpose of special bonds to include mergers and restructuring [9][10].

Core Viewpoint - The current "capital replenishment" trend among small and medium-sized banks in China is driven by narrowing net interest margins, intensified market competition, and the need for these institutions to enhance quality while reducing quantity through mergers and acquisitions [2][10]. Group 1: Capital Replenishment Trend - Since the beginning of 2026, over 80 small and medium-sized banks have initiated capital replenishment due to pressure on capital adequacy ratios [2]. - Various capital replenishment tools are being utilized, including targeted placements, convertible bond conversions, and perpetual bonds [2][6]. - The capital adequacy ratios of some banks, such as Chengdu Bank and Hubei Bank, are below industry averages, necessitating capital increases to enhance their financial strength [5][6]. Group 2: Regulatory and Market Influences - Regulatory guidance is pushing small and medium-sized banks to return to their core operations, which requires sufficient capital support [9][10]. - The average capital adequacy ratios for city commercial banks and rural commercial banks are below the banking industry's average, indicating a pressing need for capital replenishment [6]. Group 3: Mergers and Acquisitions - Mergers and acquisitions are occurring alongside capital replenishment, as banks face operational and management pressures during the restructuring process [10][11]. - The acquisition of weaker institutions is seen as a way to optimize the banking structure and reduce high-risk entities [10][11]. Group 4: Long-term Capital Supplementation Mechanisms - There are discussions on establishing long-term mechanisms for capital replenishment, including allowing local governments to issue special bonds to support small and medium-sized banks [13][14]. - Various models for local government involvement in capital replenishment have been proposed, including indirect equity participation and market-driven collaboration with private enterprises [14][15].