Group 1 - The bond market has shown a preference for high coupon credit and mid-term rates with riding value, while the yield curve has steepened significantly due to strong short-term interest rates and weak long-term performance [7][11] - Two strategic approaches are recommended: gradually focusing on a barbell strategy and maintaining a spread compression strategy, as the short-end interest rates have limited downward space [11][39] - The current 1-year deposit rate is around 1.52%, with a potential optimistic scenario suggesting it could drop to approximately 1.5%, indicating limited room for further declines [7][11] Group 2 - The report suggests monitoring three types of spreads: the spread between government bonds and policy bank bonds, the new and old bond spreads for 30-year government bonds, and the spreads between 30-10Y and 50-30Y [11][39] - The 10-year government bond is expected to fluctuate within a range of 1.8% to 1.85% in the short term, reflecting concerns over inflation and economic growth [12][40] - The report highlights six bond selection strategies, including focusing on high-frequency trading and specific long-term and mid-term bonds [15][39] Group 3 - The bond market has experienced a recent shift with mid-term bonds performing better due to a loose funding environment and expectations of lower interbank deposit rates [18] - The current yield for 30-year government bonds is approximately 2.39%, reflecting a slight increase from the previous week [19] - The report indicates that the valuation of bonds is not high compared to other asset classes, suggesting potential investment opportunities [29][30]

Report Information - Report Title: "Floating-rate Bonds Panorama: Theoretical Pricing and Practical Applications of Floating-rate Bonds" - Report Date: March 13, 2026 - Analyst: Liu Lu, Zheng Zichen Industry Investment Rating - The report does not provide an industry investment rating. Core Views - Floating-rate bonds have a relatively small market size and low liquidity, with a current stock of about 0.87 trillion yuan, accounting for only 0.44% of the overall bond market. Their liquidity is significantly weaker than that of similar fixed-rate bonds [2][9]. - The theoretical pricing of floating-rate bonds is based on the DCF model, assuming that the benchmark interest rate remains unchanged after the valuation date. The price does not include market expectations for future benchmark interest rate changes, making them weaker in bull markets and more resilient in bear markets [2][40]. - In reality, the discount rate of floating-rate bonds is often anchored to fixed-rate bonds of the same term, with a liquidity premium of about 10BP. The floating-rate bond - fixed-rate bond spread can be used as a leading indicator of benchmark interest rate changes [3][42]. - When considering the layout of floating-rate bonds in 2026, for those anchored to LPR, their defensive properties are relatively weak due to potential interest rate cuts. For those anchored to DR007, they have stronger defensive properties, especially when there is an expectation of tightening liquidity [3][59]. Summary by Directory PART1: Floating-rate Bonds - An Overview - **Basic Definition**: Floating-rate bonds have a coupon rate composed of a "benchmark interest rate + fixed spread". The benchmark interest rate is usually a money market interest rate indicator, which is adjusted at the beginning of each interest - accruing period, while the fixed spread is determined at issuance and remains unchanged during the bond's tenure [6]. - **Market Scale**: From 1995 - 2025, floating - rate bonds in China went through three development stages: the start - up stage (1995 - 2002), the expansion stage (2003 - 2013), and the mature and fluctuating stage (2014 - 2025). As of February 23, 2026, the stock of floating - rate bonds accounted for only 0.44% of the overall bond market [9]. - **Liquidity**: The liquidity of floating - rate bonds is generally low, significantly weaker than that of similar fixed - rate bonds. For example, in December 2025, the monthly turnover rate of the most active floating - rate bond was only 58.7%, far lower than that of the most active fixed - rate bond at 1271.7% [13]. - **Bond Types**: The issuance of floating - rate bonds in China has long been dominated by policy - financial bonds, with other types participating intermittently. Currently, policy - financial bonds account for over 75% of the stock of floating - rate bonds, followed by commercial bank bonds at about 14% [16][17]. - **Benchmark Interest Rates**: The benchmark interest rates for floating - rate bonds have evolved over time. Currently, DR007 and LPR are the dominant benchmarks, accounting for over 93% of the stock, with DR007 at 57.23% and LPR at 36.23% [24]. - **Maturity Structure**: The issuance term of floating - rate bonds has been shortening. Currently, 1 - 3 - year bonds are the mainstream, accounting for about 85% of the stock [28]. PART2: Theoretical Pricing Mechanism of Floating - rate Bonds - **Pricing Formula**: The valuation of floating - rate bonds is based on the DCF model. To avoid predicting future benchmark interest rates, it is generally assumed that the benchmark interest rate remains unchanged after the valuation date. The pricing formulas of the China Foreign Exchange Trade System and the ChinaBond Valuation Center are basically the same in principle [34][35][36]. - **Impact of Benchmark Interest Rate Fluctuations**: Benchmark interest rate fluctuations have a more significant impact on fixed - rate bonds than on floating - rate bonds. Floating - rate bonds tend to be weaker in bull markets and more resilient in bear markets [38][39][40]. PART3: Real - world Pricing and Application of Floating - rate Bonds - **Pricing with Market Expectations**: In reality, the pricing of floating - rate bonds often includes some market expectations. The discount rate is usually anchored to fixed - rate bonds of the same term, and the floating - rate bond - fixed - rate bond spread can indicate market expectations of interest rate cuts [42]. - **Liquidity Premium**: The valuation yield of floating - rate bonds is generally higher than that of fixed - rate bonds of the same term, with a liquidity premium of about 10BP [44]. - **Indicator of Interest Rate Cuts**: The floating - rate bond - fixed - rate bond spread can be used as a leading indicator of benchmark interest rate changes. An increase in the spread indicates rising market expectations of interest rate cuts [46]. - **Annual Performance**: The conclusion that floating - rate bonds are weaker in bull markets and more resilient in bear markets is generally supported by their annual performance from 2011 - 2025 [48]. - **High - frequency Performance**: From a high - frequency perspective, the combination of changes in the yield to maturity and the benchmark interest rate has different effects on the price of floating - rate bonds. When the benchmark interest rate is stable, the advantages of floating - rate bonds over fixed - rate bonds are not obvious. Floating - rate bonds have defensive properties when the benchmark interest rate is rising and perform weaker when it is falling [50][52][55]. - **2026 Investment Considerations**: For floating - rate bonds anchored to LPR, their defensive properties are relatively weak in 2026 due to potential interest rate cuts. For those anchored to DR007, they have stronger defensive properties, especially when there is an expectation of tightening liquidity [59].

Group 1 - The report indicates that short-term interest rates are continuously declining, leading to a reduced arbitrage space, with current deposit rates around 1.55% being at a historically low spread compared to DR001 [8][12][41] - It is expected that the momentum for further decline in short-term rates will gradually weaken, although there is a possibility of a reserve requirement ratio cut due to a loose monetary policy stance [12][41] - Long-term interest rates are likely to experience low volatility due to risk aversion and concerns about domestic demand recovery, with the 10-year government bond yield projected to fluctuate between 1.75% and 1.85% [12][41][42] Group 2 - The report suggests that there are still attractive trading positions in the bond market, particularly in 10-year government bonds, 30-year active government bonds, and 50-year government bonds, which are expected to perform well if there is no significant adjustment pressure in the bond market [13][42] - Six strategies for bond selection are proposed, including focusing on high-frequency trading opportunities and considering long-end government bonds with good liquidity and value [17][42] - The report emphasizes the importance of monitoring the issuance of special government bonds and central bank support, as there may be significant relative downward opportunities for ultra-long bonds [13][42] Group 3 - The bond market has seen a downward trend in yields, with short-term products performing well due to maintained liquidity and expectations of a reserve requirement ratio cut [20][38] - The report highlights that the yield curve has steepened, with the yield spread between 10-year and 1-year government bonds increasing by 4 basis points to around 50 basis points [38] - The valuation of bonds is considered not expensive compared to other asset classes, with the current bond yield relative to the stock market indicating that bonds are not overvalued [31][38]

Group 1 - The report highlights two key issues to focus on in March's bond market: the impact of Middle Eastern conflicts on asset correlations and the potential for easing in domestic monetary policy [7][36][37] - Current pricing indicates that the 10-year government bond yield is slightly below 1.8%, with limited market enthusiasm for further buying, as evidenced by profit-taking sentiments after the holiday leading to a rise in yields [7][36] - The report anticipates that geopolitical risks may lead to a temporary decline in bond yields, with a low point expected around 1.75% for the 10-year government bond [7][36][37] Group 2 - Investment opportunities in bonds include high-odds trading positions in 10-year government bonds, 30-year active government bonds, and 50-year government bonds, which are expected to perform well if the bond market does not face significant adjustment pressure [12][37] - Credit bonds are highlighted for their demand potential, particularly with an upcoming opening period for certain bond funds, which may increase the allocation demand for 3-5 year credit bonds [12][37] - Short-term bonds are expected to remain stable while waiting for potential easing opportunities, as short-end rates are low and the adjustment pressure is minimal [12][37] Group 3 - The report outlines six strategies for bond selection, including focusing on high-frequency trading options and long-end government bonds, as well as specific recommendations for various bond codes [15][37] - For floating rate bonds, attention is drawn to specific bonds that present low risk but also limited excess returns, making them attractive for money market funds [15][37] - The report notes that the current market conditions suggest a cautious approach to bond trading, with a focus on managing the timing of trades effectively [16][37] Group 4 - The bond market's weekly review indicates a slight increase in bond yields, primarily driven by strong performance in equities post-holiday and profit-taking sentiments among bond investors [18][36] - The report provides a comparative analysis of bond valuations against other asset classes, indicating that bond yields are relatively low compared to some equity sectors and commodities [26][36] - The report's predictive models suggest a cautious outlook for the bond market, with a shift to a bearish stance in the primary model due to recent trading patterns [23][36]

1. Report's Industry Investment Rating - Not provided in the content. 2. Report's Core View - The floating - rate bond market in China is currently small in scale, with policy - bank bonds as the main component. Its relative investment value depends on the trend of the benchmark interest rate. It is recommended to allocate more when the benchmark interest rate is expected to rise and sell when it is expected to fall. Currently, the short - term allocation value of floating - rate bonds is not prominent [5]. 3. Summary by Directory 3.1 China's Floating - Rate Bond Market Situation 3.1.1 Main Features of Floating - Rate Bonds - Floating - rate bonds are favored in the "low - interest + high - volatility" environment due to the increased demand for reducing issuance costs and defensive allocation. They have a coupon reset mechanism to hedge against interest - rate risks and can reduce issuers' costs. Their coupon consists of a "benchmark interest rate + fixed spread", and the benchmark is often linked to market - based rates [11]. - Floating - rate bonds have unique advantages in interest - rate risk management. They can save financing costs for issuers in a low - interest environment and hedge against interest - rate and inflation risks for investors [12]. - The basic elements of floating - rate bonds include face value, term, interest - calculation method, and payment frequency. They differ from fixed - rate bonds in interest composition, return certainty, and interest - rate risk exposure [13]. 3.1.2 Development History of the Floating - Rate Bond Market - The development of China's floating - rate bond market has gone through multiple expansion phases. It started in 1995, experienced a start - up exploration period (1995 - 2000), a diversified expansion period (2003 - 2011), a mature optimization stage (2014 - 2021), and an adjustment and restart period (2022 - present) [15]. - In terms of variety structure, policy - bank bonds dominated in the early stage, and asset - backed securities once became the main driver of market growth. Since 2022, policy - bank bonds have regained the dominant position, and bank - type credit bonds have increased in 2025 [20]. - The benchmark interest - rate system has evolved from being concentrated on the one - year fixed - deposit rate to a more diversified system, including LPR, SHIBOR, and DR series [24]. - The issuance - term structure has changed from long - term in the early stage to a more concentrated 2 - 3 - year structure recently [27]. 3.1.3 Stock Size and Structure - As of February 4, 2026, the stock of floating - rate bonds in China is over 80 billion yuan, accounting for 0.44% of the overall bond market. Compared with the US, there is room for growth. The stock is concentrated in the medium - and short - term, with 2 - 3 - year bonds accounting for 68%. Policy - bank bonds have the highest proportion, followed by other financial bonds and asset - backed securities [30]. - The benchmark interest rates of the stock floating - rate bonds are mainly DR007 and LPR, with DR007 - based repo rates accounting for 54% and LPR series accounting for 35% [31]. 3.1.4 Liquidity of the Floating - Rate Bond Market - The secondary - market liquidity of floating - rate bonds is generally low due to complex pricing and valuation, limited market size, and reduced defensive and trading attractiveness. In January 2026, the trading volume of floating - rate bonds was about 7.89 billion yuan, lower than that of mainstream fixed - rate bonds [37]. - There is significant differentiation in liquidity among different types of floating - rate bonds, with policy - bank floating - rate bonds being the most active. In January 2026, the monthly trading volume of policy - bank bonds reached 7.11 billion yuan [40]. 3.2 Pricing and Valuation of Floating - Rate Bonds 3.2.1 Floating - Rate Bond Valuation Model (ChinaBond) - The price of a floating - rate bond is affected by the benchmark interest rate and the spread yield. The valuation model shows that the price is less sensitive to the benchmark interest rate but more sensitive to the spread yield [46]. 3.2.2 Floating - Rate Bond Duration Valuation Formula (ChinaBond) - The spread duration of a floating - rate bond has a more significant negative correlation with the price, similar to the relationship between the fixed - rate bond's yield to maturity and its price [55]. 3.2.3 Yield to Maturity of Floating - Rate Bonds in Actual Trading - The market still refers to comparable fixed - rate bonds when pricing the yield to maturity of floating - rate bonds. The spread of floating - rate bonds reflects the relative change between the long - term yield to maturity and the short - term benchmark interest rate [63]. 3.3 Relative Investment Value of Floating - Rate Bonds in Different Market Environments 3.3.1 Comparison between Floating - Rate Bonds with LPR as the Benchmark and Fixed - Rate Bonds - In most cases, floating - rate bonds linked to LPR underperformed fixed - rate bonds from 2023 to 2026 because the LPR was in a downward trend during the tenure of the floating - rate bond, and the coupon rate gradually decreased, failing to hedge against the increase in the yield to maturity [77]. 3.3.2 Comparison between Floating - Rate Bonds with DR007 as the Benchmark and Fixed - Rate Bonds - Floating - rate bonds underperformed fixed - rate bonds in bull and volatile markets. In bear markets, their performance was divided. When the DR007 central rate increased, floating - rate bonds outperformed; when it decreased, they underperformed [85]. 3.3.3 Floating - Rate Bond Investment Strategy - Investors should break the mindset of regarding floating - rate bonds as only "bear - market tools" and focus on the trend of the benchmark interest rate. Floating - rate bonds are more suitable for short - term investment. They are recommended to be allocated when the benchmark interest rate is expected to rise and sold when it is expected to fall. Currently, their relative cost - effectiveness is not prominent [94].

Core Viewpoint - The article discusses the importance of effectively managing interest rate risk in the context of increasing global interest rate volatility and the development of China's bond market, highlighting the unique risk management and asset allocation value of floating-rate bonds [1]. Group 1: Floating-Rate Bond Risk Hedging Effect - The hedging effect of floating-rate bonds is not automatic and heavily depends on the precision of their terms [1]. - The choice of benchmark interest rate is crucial, as different rates (e.g., DR007, LPR, SHIBOR) have varying volatility characteristics and market implications, making alignment with the investor's risk sources essential for effective hedging [2]. - The setting of repricing cycles can significantly enhance the stability and predictability of investment portfolio returns, with shorter cycles better aligning with benchmark rate fluctuations [2]. - The repricing calculation rules should be closely aligned with current market rates to provide timely and accurate risk hedging [2]. Group 2: Floating-Rate Bond Valuation Practices, Characteristics, and Sensitivity Analysis - Cash flow discount models are commonly used for valuation, but differences in predicting future cash flows and selecting discount rates can lead to varied valuation results [3]. - The valuation of floating-rate bonds is influenced by both future coupon rates and the discount rate, with price stability occurring when both move in the same direction, while opposite movements increase volatility [3]. - Sensitivity analysis indicates that floating-rate bond valuations are more sensitive to changes in spread yield than to benchmark interest rate changes, making the accurate determination of spread yield a key challenge [3]. Group 3: Policy and Practical Implications - Recommendations for developing China's floating-rate bond market include enhancing market liquidity through improved market maker systems and encouraging investor participation [4]. - Product design should be optimized to offer more diverse and standardized terms, catering to various investor risk management needs [4]. - Valuation mechanisms should be refined to explore differentiated methods based on the activity level of floating-rate bonds, enhancing overall market pricing capability and transparency [5].

Group 1 - The bond market is experiencing a bullish trend, with the 10-year government bond yield fluctuating around 1.8% after a decline to this level on January 28. Recent movements indicate a gradual decrease in yields for long-term government bonds and government-backed securities [7][11][39] - Investors are advised to focus on three key questions regarding the potential for further yield declines: the extent of the rebound in yields, the possibility of further declines in the 10-year government bond yield, and the outlook for perpetual bonds [7][11][39] - The current spread between the 30-year and 10-year government bonds is approximately 42-43 basis points, with expectations that the 30-year yield could decline to around 2.2% if the 10-year yield remains stable at 1.8% [7][11][39] Group 2 - The report suggests that the 10-year government bond yield may face strong resistance at the 1.8% level, requiring significant positive stimuli to break below this threshold. Factors to monitor include potential interest rate cuts by the central bank and economic pressures affecting risk assets [12][41] - The sentiment around perpetual bonds has improved, with yields declining due to increased liquidity and positive market sentiment. However, the absolute returns on these bonds are currently limited [12][41] - The report outlines five strategies for bond selection, including focusing on high-frequency trading opportunities, long-term government bonds, and specific government-backed securities based on yield spreads [16][39] Group 3 - The bond market's overall sentiment remains strong, with a lack of significant negative factors currently impacting trading opportunities. The recent decline in overnight funding rates has further bolstered investor optimism [19][30] - The report indicates that the valuation of bonds is relatively attractive compared to other asset classes, with the current yield levels not appearing overly high [30][31] - The analysis of institutional holding costs shows that the average cost for funds holding 10-year government bonds is around 1.83%, indicating slight profitability for these institutions [22][30]

Core Viewpoint - Jinshang Bank's 2026 work meeting emphasized the importance of deepening reforms, ensuring transformation, and enhancing quality and efficiency to create value, manage risks, and support local development in the new five-year plan [1]. Group 1: 2025 Achievements - Jinshang Bank's transformation in 2025 showed significant results, with key areas like technology finance, green finance, and inclusive micro-loans growing over 10%. The bank led in "guaranteeing housing" credit in Shanxi Province, and county deposits became a new growth highlight [3]. - Innovative business breakthroughs included the first "Port Cloud Warehouse" financing and cross-border RMB settlement for aircraft bonded procurement in the province, along with successful issuance of technology innovation bonds and floating rate bonds, significantly increasing income from wealth management and trade finance intermediary services [3]. - The risk management system was comprehensively restructured, successfully resolving risks in village and town banks, with self-research in technology rising to 13%, laying a solid foundation for high-quality development [3]. Group 2: 2026 Focus Areas - The bank will focus on five key directions for high-quality development in 2026, starting with enhancing service efficiency for the real economy by creating a "green energy + finance" service model and supporting major provincial projects [4]. - The second focus is on deepening reforms to stimulate internal growth, implementing innovative incentives like "ranking and competition," and enhancing digital capabilities through AI to improve operational efficiency [5]. - The third focus is on strict risk management, establishing a comprehensive risk prevention system, and transitioning risk management to proactive prevention and control [5]. - The fourth focus is on building a high-quality professional team, developing a cadre of politically aware and management-savvy leaders, and implementing specialized training programs to enhance overall capabilities [5]. - The fifth focus is on leading with party building to ensure high-quality development, integrating party activities with business planning and assessment [5].

Group 1 - The report suggests that the recent peak for the 10-year government bond is around 1.9%, with potential upward movement if equity and commodity markets rise again. However, the upward space for long-term bond rates is limited, recommending a neutral duration strategy for portfolios [7][11][39] - Potential bullish factors for bonds include a period of rate stabilization after reaching high levels and expectations for interest rate cuts around the Lunar New Year, particularly if the central bank lowers relending and rediscount rates [7][39][40] - The report highlights that medium to long-term government bonds have performed well due to better-than-expected redemption regulations and a preference for government bonds in the secondary market, suggesting continued attention to their relative value [12][40] Group 2 - The report outlines four strategies for bond selection: focusing on high-frequency trading opportunities, considering long-term bonds with favorable odds, identifying trading opportunities in medium-term government bonds, and assessing the value of specific bonds [15][36] - In the context of 30-year government bonds, the current spread between 30-year and 10-year bonds is around 46 basis points, with expectations for this spread to widen due to supply concerns and nominal growth expectations [14][36] - The report indicates that the current yield levels for various bonds are not high compared to historical averages, suggesting that bonds may be undervalued relative to equities [28][36]

Market Overview - On January 6, the Shanghai Composite Index rose by 1.5%, the CSI 300 increased by 1.55%, the STAR 50 climbed by 1.84%, the CSI 1000 went up by 1.43%, the ChiNext Index gained 0.75%, and the Hang Seng Index rose by 1.38% [4] - The best-performing sectors on January 6 were non-ferrous metals (+4.26%), non-bank financials (+3.73%), basic chemicals (+3.12%), defense and military industry (+3.08%), and comprehensive sector (+2.89%). The worst-performing sector was telecommunications (-0.77%) [4] - The total trading volume for the A-share market on January 6 was 28,323 billion, with a net inflow of 2.879 billion Hong Kong dollars from southbound funds [4] Key Insights - The macroeconomic report highlighted two core viewpoints: asset replacement in reserves and a focus on basic and rare metals as a main theme [5] - The geopolitical environment is exceeding expectations, and a potential easing of US-China tensions could lead to a reassessment of national security demands. Additionally, rapid advancements in AI technology may boost global growth and alleviate debt and geopolitical pressures [6] - In the bond market, the current pricing framework for floating-rate bonds is more closely linked to the DR007 benchmark rate. The investment value of floating-rate bonds is expected to improve, considering the narrowing of the short-term interest rate corridor and changes in the yield curve [7] Industry Commentary - The 2025 box office data released by the film bureau showed a total box office of 51.832 billion and 1.238 billion viewers, both exceeding a 20% increase compared to the previous year [10] - The Spring Festival box office set a record for the same period, and the summer box office showed steady growth compared to last year. Several imported blockbusters performed better than expected towards the end of the year, with top films, especially animated ones, dominating the market [10] - Investment opportunities are suggested in companies like Wanda Film, Bona Film, China Film, Shanghai Film, Happy Blue Ocean, Maoyan Entertainment (Hong Kong), and Damai Entertainment (Hong Kong) for the 2026 Spring Festival [10]