Group 1 - The core viewpoint indicates that the equity market is experiencing significant volatility due to ongoing geopolitical conflicts, leading to a shift in investor sentiment from short-term fluctuations to long-term pessimism, which has resulted in widespread panic selling and capital outflows affecting global markets, including A-shares [2][9] - Despite the overall strong performance of A-share indices, the market remains sensitive to negative news, which may amplify adverse impacts and increase volatility in the short term [3][12] - The report suggests that the resilience of the A-share market is notable, with expectations for a potential recovery as negative factors are digested, indicating a wide range of fluctuations may characterize the market in the short term [3][13] Group 2 - The report recommends a short-term focus on stable dividend sectors to mitigate volatility risks, while mid to long-term attention should be directed towards innovation-driven sectors such as computing and telecommunications for recovery opportunities [5][14] - The bond market is expected to attract more funds due to reduced risk appetite from geopolitical tensions, with short-term bonds being a preferable choice for investors seeking flexibility [6][35] - In the commodity market, there is a notable fluctuation in energy and precious metals, with the potential for gold to maintain a gradual upward trend in the long term despite short-term volatility risks [7][40]

Investment Rating - The report maintains a positive outlook on short-term bonds, undervalued convertible bonds, and gold assets [2][10][22]. Core Insights - The report predicts an increase in the level factor, steepening of the slope factor, and convexity of the curvature factor in the bond market, recommending the holding of 1-year short-duration bonds [10]. - As of March 27, 2026, the "hundred-yuan conversion premium rate" stands at 41.71%, indicating a low relative value for convertible bonds compared to their underlying stocks [13][15]. - The expected return on gold for the next year is projected to be 33%, with a historical absolute return of 62% based on TIPS yield strategies [22][24]. Summary by Sections Multi-Asset Allocation Viewpoints - The report advocates for a bullish stance on short-duration bonds, undervalued convertible bonds, and gold assets [2]. - The bond duration timing perspective suggests holding 1-year short-duration bonds due to predicted market movements [10][12]. Stock and Bond Allocation Viewpoints - The report is bearish on equity assets, with the latest equity position at 4.21% [26][31]. - The stock-bond rotation strategy has shown a negative return of -0.44% for March, with an average equity position of 4.72% and a bond position of 95.28% [31][33]. Industry Rotation Insights - The report recommends a bullish outlook on the banking, pharmaceutical, electrical equipment, media, textile, and commercial sectors [4][41]. - The growth style is favored over value style, with a higher score for growth sectors [41]. - The ETF rotation strategy includes specific ETFs for banking, healthcare, electrical equipment, and media, with recent performance showing an excess return of 1.14% compared to the average industry return [50][46].

- The bond duration timing model uses an improved Diebold2006 model to predict the spot yield curve and map the expected returns of bonds with different durations. The model predicts the level, slope, and curvature factors, with the level factor prediction based on macro variables and policy rate following, and the slope and curvature factors prediction based on the AR(1) model[10] - The convertible bond allocation model compares the relative valuation of convertible bonds and stocks using the "100-yuan conversion premium rate" and calculates the rolling historical percentile to measure the current relative allocation value of convertible bonds and stocks. As of March 27, 2026, the "100-yuan conversion premium rate" was 41.71%, with a rolling three-year percentile of 92.8% and a rolling five-year percentile of 95.7%, indicating a relatively low cost-effectiveness compared to stocks[13][15] - The convertible bond style rotation model constructs a convertible bond style rotation portfolio by excluding high-valuation convertible bonds using the conversion premium rate deviation factor and the theoretical value deviation factor, and capturing market sentiment using the 20-day momentum and volatility deviation of convertible bonds. From February 14, 2018, to March 13, 2026, the annualized return of the convertible bond style rotation was 25.60%, with a maximum drawdown of 15.89% and an IR of 1.51. The return since 2026 was 9.34%[16] - The gold expected return model links the forward real returns of gold and US TIPS, constructing the expected return model for gold. The formula is $E[Real\_Return^{gold}]=k\times E[Real\_Return^{Tips}]$ and $E[R^{gold}]=\pi^{e}+k\times E[Real\_Return^{Tips}]$, where the parameter k is estimated using an expanding window OLS, and the long-term inflation target of the Federal Reserve (2%) is used as the proxy for $\pi^{e}$. As of March 27, 2026, the model estimated the expected return of gold for the next year to be 33.0%[22][23] - The A-share equity market timing framework is constructed from six dimensions: macro liquidity, credit expectations, cross-border capital flows, derivatives expectations, market capital flows, and technical analysis. Based on timing signals, a stock-bond rotation portfolio is constructed using a risk budget model. As of March 27, 2026, the comprehensive signal was -0.23, indicating a bearish view on equity assets[29][31] - The industry rotation model constructs sub-models from six dimensions: trading behavior, prosperity, capital flow, chip structure, macro drive, and technical analysis, and dynamically synthesizes the models to select industries on a bi-weekly basis. The latest industry configuration recommendations are banking, pharmaceuticals, electrical equipment, media, apparel, and commerce. The style judgment recommends a growth style over a value style[35][41] Model Backtest Results - Bond duration timing model: March return of 18.3bp, equal-weighted benchmark return of 6.4bp, strategy excess return of 11.9bp. The return over the past year was 1.57%, equal-weighted benchmark return of -0.12%, strategy excess return of 1.69%[12] - Convertible bond style rotation model: Annualized return of 25.60%, maximum drawdown of 15.89%, IR of 1.51. The return since 2026 was 9.34%[16] - Gold expected return model: Expected return for the next year is 33.0%. The absolute return of the timing model based on TIPS yield over the past year was 62.0%[22][24][25] - Stock-bond rotation portfolio (risk budget): Annualized return of 8.16%, maximum drawdown of 3.74%, return volatility ratio of 2.76, return drawdown ratio of 2.19. March return of -0.44%, latest equity position of 4.21%[33][36] - Industry rotation model: March long portfolio return of -6.42%, short portfolio return of -7.73%, equal-weighted benchmark return of -7.23%, long excess return of 0.81%, short excess return of 0.5%, long-short portfolio return of 1.65%[38][40] - ETF rotation portfolio: March return of -5.69%, average return of tracked industries of -6.84%, excess return of 1.14%. Latest ETF rotation portfolio holdings: Game ETF Huaxia, Battery ETF Guangfa, Medical ETF Huabao, Banking ETF Huabao[46][50][53]

Group 1 - The report highlights the significant rise in geopolitical tensions in the Middle East, leading to a surge in oil prices and concerns over global economic stagnation and inflation [2][4] - The 10-year bond yields in various countries have increased, with the US at 4.4%, while China's 10-year bond yield remains relatively low at around 1.83%, benefiting from stable monetary policy and low domestic inflation [2][7] - The report indicates that the geopolitical conflict may evolve into a prolonged standoff, increasing market volatility and affecting inflation and corporate costs, which could lead central banks to maintain tight monetary policies [11] Group 2 - The macroeconomic outlook shows rising inflation concerns, with the US Federal Reserve raising its core inflation forecast to 2.7% while increasing GDP growth expectations to 2.4% for 2026 [8] - The European Central Bank has downgraded its GDP growth forecast from 1.2% to 0.9% for 2026, while raising inflation expectations from 1.9% to 2.6% due to rising oil and gas prices [9] - The Bank of Japan is maintaining a cautious stance on monetary policy normalization, acknowledging the economic pressures from high oil prices and geopolitical tensions [10]

Group 1: Credit Market Insights - The lower limit for 1-year certificates of deposit (CDs) is estimated to be 1.5%, with a potential compression towards this limit expected by early April[1] - Recent trends show that both CDs and short-term bonds have been declining, raising concerns about potential overcorrection and subsequent risks of rebound[7] - The current pricing logic for the bond market's short and long ends is significantly different, making mean reversion logic less applicable[7] Group 2: Market Drivers and Trends - The central bank's monetary policy adjustments have led to a gradual decrease in funding volatility, supporting a sustained liquidity environment[9] - The issuance of CDs has been continuously shrinking, reflecting limited enthusiasm from banks to supplement liabilities due to general credit issuance intensity[9] - The recent upgrade in interbank demand deposit self-discipline has positively impacted short-term bonds, with market reactions stronger than anticipated[11] Group 3: Financial Data and Projections - February credit growth showed a year-on-year decrease compared to January, but this is not expected to significantly alter the outlook for credit issuance in 2026[16] - The net maturity of 6-month buyout operations is projected at 100 billion, similar to the previous 3-month buyout of 200 billion, indicating banks are proactively reducing buyout volumes rather than the central bank cutting back on liquidity[16] - The 1-year government bond yield has recently dropped below 1.5%, which may open up further downward space for CDs[10] Group 4: Risk Considerations - Potential risks include unexpected liquidity tightening, accelerated economic recovery, and increased bond supply[46]

1. Report Industry Investment Rating No information provided in the report. 2. Core Viewpoints of the Report - The central bank strengthened the regulation of the self - discipline of inter - bank large - value current deposit interest rates to standardize market behaviors that may undermine monetary policy transmission. This move reduces the cash - holding income of non - bank institutions, enhances the market demand for cash substitutes such as inter - bank certificates of deposit (CDs), short - term bonds, and ABS, and leads to a decline in repo rates. The subsequent decline in the yield of short - term assets, represented by inter - bank CDs, depends on the actual decline of R007. In normal times, the 1 - year CD yield will not fall below R007. In the future, strengthening the regulation of market behaviors that undermine monetary policy transmission may be a key task of the central bank this year. As the yields of bank current wealth management products approach those of public money market funds, it may bring greater allocation power to short - term assets, and the extremely low interest rate spread will continue [1][5][8]. 3. Summary by Relevant Catalogs 3.1 Analysis of the Upgrade of Inter - bank Current Deposit Self - Discipline - **Self - discipline requirements**: Some member banks were required to strengthen self - management, with the proportion of inter - bank current deposits with an interest rate higher than the 7 - day reverse repurchase OMO policy rate (1.4%) not exceeding 10% - 20% at the end of each quarter. This is an expansion and strengthening of the self - management in late 2024 [2][14]. - **Purpose of regulation**: It aims to strengthen the regulation of market behaviors that undermine monetary policy transmission. The central bank has established a monetary policy transmission mechanism with the 7 - day reverse repurchase rate as the starting point of the policy rate, and the timely adjustment of policy rates and a reasonable transmission process directly affect the effectiveness of monetary policy [3][15]. - **Negative impacts**: High inter - bank current deposit interest rates lead to high inter - bank liability costs for commercial banks, which is unfavorable to the transmission chain of "lowering commercial banks' interest - paying costs - stabilizing interest rate spreads - opening up room for overall interest rate cuts" and increases the difficulty of balancing "supporting the real economy and maintaining the health of the banking system." Also, there is an obvious inversion between inter - bank current deposit rates and entity current deposit rates, which leads to arbitrage behavior [4][16]. - **Market impacts**: The upgrade of inter - bank current deposit self - discipline reduces the cash - holding income of non - bank institutions, enhances the market demand for cash substitutes such as inter - bank CDs, short - term bonds, and ABS, and causes a decline in repo rates. The subsequent decline in the yield of 1 - year inter - bank CDs of national and regional banks depends on the actual decline of R007. In normal times, the 1 - year CD yield will not fall below R007 [5][17][18]. - **Future outlook**: Strengthening the regulation of market behaviors that undermine monetary policy transmission may be a key task of the central bank this year. As the yields of bank current wealth management products approach those of public money market funds, it may bring greater allocation power to short - term assets, and the extremely low interest rate spread will continue [8][19]. 3.2 Narrow - Sense Liquidity 3.2.1 Central Bank Operations - **Short - term liquidity**: The central bank conducts short - term liquidity operations to smooth out fluctuations. In the week from March 9 to March 13, 2026, the net short - term liquidity injection was - 1011 billion yuan, with a total reverse repurchase injection of 1765 billion yuan and a total reverse repurchase maturity of 2776 billion yuan [20]. - **Medium - and long - term liquidity**: The 3 - month and 6 - month maturity buy - out reverse repurchases have started to shrink [20]. 3.2.2 Institution - Level Fund Inflow and Outflow - **Fund supply (lenders)**: Large - scale banks' net fund outflows are at a seasonal high [25]. - **Fund demand (borrowers)**: The absolute financing balance is high, while the relative leverage ratio is low [38]. 3.2.3 Repo Market Transaction - **Fund volume and price**: The volume is large, and the price is stable. The trading volume of inter - bank pledged repo is high, and the proportion of R001 trading is relatively stable [43][45]. - **Fund sentiment index**: The fund sentiment is relatively loose [51]. 3.2.4 Interest Rate Swaps - The cost of interest rate swaps fluctuates slightly, and the spread between CDs and interest rate swaps remains at a low level [58]. 3.3 Government Bonds 3.3.1 Next - Week Net Government Bond Payment - The net payment of government bonds next week will increase significantly. The total net payment in the past week was 1621 billion yuan, and it is expected to be 2363 billion yuan next week [60]. 3.3.2 Government Bond Maturity Structure - **Ultra - long - term bonds**: As of March 13, 2026, the issuance amount and proportion of ultra - long - term bonds (with a maturity of more than 10 years) have changed over time [61][62]. - **Treasury bonds**: The issuance structure of treasury bonds in 2024, 2025, and 2026 shows different proportions for different maturities, with the proportion of 1 - year - and - below treasury bonds being 34.57%, 33.06%, and 31.16% respectively [63]. - **Local government bonds**: The issuance structure of local government bonds in 2024, 2025, and 2026 also shows different proportions for different maturities, with the proportion of 10 - year - and - above local government bonds being 42.71%, 47.68%, and 53.49% respectively [64]. 3.4 Inter - bank Certificates of Deposit 3.4.1 Absolute Yield - The yield curves of SHIBOR and AAA - rated inter - bank CDs have changed over the past week [66]. 3.4.2 Issuance and Outstanding Amount - **Issuance structure**: As of March 13, 2026, the total issuance of inter - bank CDs was 716.4 billion yuan, with different proportions for different maturities and different types of banks [70]. - **Outstanding structure**: As of March 13, 2026, the total outstanding amount of inter - bank CDs was 1846.667 billion yuan, with different proportions for different maturities and different types of banks [71]. 3.4.3 Relative Valuation - The spreads between the 1 - year AAA - rated inter - bank CD yield and R007, DR007, and the 10 - year treasury bond yield are 3bp, 7bp, and 28bp respectively as of March 13, 2026, with different quantiles since 2020 [73].

Group 1 - The core viewpoint of the report indicates that the 1-year certificate of deposit (CD) is expected to align with the 1-year MLF marginal interest rate, potentially approaching 1.5% in the future [1][9] - The report discusses the implementation of a self-discipline mechanism for interbank deposits, which will require non-bank interbank demand deposit rates to be included in self-regulation starting from Q1 2025, referencing the 7-day OMO policy rate [7][8] - It is anticipated that the self-discipline mechanism may lead to a reduction in the yields of interbank demand deposits, with an estimated decrease of 5 basis points based on weighted rates [7][8] Group 2 - The report outlines two main pathways through which the self-discipline upgrade will affect the pricing of CDs and short-term bonds: potential outflows of non-bank deposits and a shift in demand towards CDs and short-term bonds due to regulatory changes [8][9] - The pricing anchor for the 1-year CD is expected to be influenced by the 1-year MLF marginal interest rate, with a focus on the relationship between R007, government bonds, and CDs [9] - The liquidity situation in March is expected to remain stable, with credit issuance being moderate and the central bank's support providing a fundamental backing [9]

1. Industry Investment Rating - No relevant information provided in the report. 2. Core Viewpoints - After a continuous decline, the bond market adjusted this week, with interest - rate bond yields rising overall, driving up credit - bond yields. Credit investors may need to control duration and be more cautious. It is recommended to look for coupon - bearing assets in bonds with a maturity of about 2 years or less. For Tier - 2 and perpetual bonds and ultra - long bonds, appropriate waiting is needed [1][3][4]. 3. Summary by Directory 3.1 How to Understand This Week's Trend? - The bond market adjusted this week after a continuous decline. Interest - rate bond yields rose overall, driving up credit - bond yields. In terms of varieties, the increase of Tier - 2 and perpetual bonds was higher than that of general credit bonds, and the yields of some low - grade coupon credit bonds even declined further. In terms of maturity, the increase of ultra - long credit bonds over 5 years was higher than that of medium - and short - term credit bonds. In terms of credit spreads, the spreads of Tier - 2 and perpetual bonds widened, while those of general credit bonds were mostly compressed passively [1][10]. - From an institutional perspective, funds, wealth management products, money - market funds, insurance companies, and other institutions are still net buyers of credit bonds in the secondary market, mainly focusing on general credit bonds with a maturity of 3 years or less. Other institutions have taken over some ultra - long credit bonds, but the overall volume is limited. Funds sold long - term interest - rate bonds and bought short - term credit bonds for risk - avoidance [13][14]. 3.2 How to Understand the Recent Trend of Tier - 2 and Perpetual Bonds? - Since the second half of 2025, Tier - 2 and perpetual bonds have experienced a process of continuous weakness - equivalence - continuous strength compared with general credit bonds. The reasons for the weakness in the second half of 2025 are: the increase in value - added tax on financial bonds, concerns caused by new regulations on public - fund redemptions, the fact that amortized - cost bond funds can only invest in general credit bonds, and the portfolio adjustment needs of insurance companies due to the implementation of new accounting standards [2][16]. - In 2026, most of the unfavorable factors have become history, but the impact of amortized - cost bond funds is still difficult to fade. Benefiting from the strong performance of the stock market, the subscription volume of fixed - income + funds has increased significantly, bringing additional buying power for Tier - 2 and perpetual bonds. Also, with the decline of the bond market, market sentiment has been good, and Tier - 2 and perpetual bonds have relatively benefited [2][24]. 3.3 How to Look Forward When Credit Spreads Are at a Low Level? - Recently, as the bond market has continued to decline, credit - bond yield spreads have also declined. Currently, both credit - bond yields and credit spreads have dropped to relatively low levels. The yields and spreads of credit bonds with a maturity of less than 2 years have dropped to extremely low historical levels, and there is little room for further decline in credit spreads [3][26]. - Looking back at history, when credit spreads are at a low level, the positive effects of interest - rate cuts on credit bonds are not strong, as seen in February 2020. After credit spreads decline to an absolute low level, there are more unfavorable factors than favorable ones. Historically, when spreads widen, credit - bond yields are likely to rise as well. For credit investments, it may be necessary to control duration and be more cautious [3][30][33]. 3.4 How to Participate? - Short - term bonds with a maturity of about 2 years are a high - probability choice in the current environment. It is recommended to look for coupon - bearing assets in bonds with a maturity of about 2 years or less [4][36]. - For Tier - 2 and perpetual bonds, appropriate waiting is needed. As the stock market enters a volatile period, the inflow of fixed - income + funds may slow down, and the price - performance ratio of Tier - 2 and perpetual bonds has significantly decreased [4][36]. - Ultra - long bonds also require appropriate waiting. Currently, the relative value of ultra - long bonds is low, and market sentiment is poor. The trading volume has increased significantly, banks' net sales before the Spring Festival have increased substantially, and credit spreads have dropped to the lowest level since 2025 [4][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]

Core Viewpoint - The global asset allocation logic is shifting towards profit realization, with a priority on equity assets, while bonds require strict control of long-end risks [2] Group 1: Asset Allocation Strategy - Equity assets are prioritized in the current global asset allocation, supported by the debt-equity ratio advantage and policy support in A-shares, entering a "slow bull" phase [2] - The U.S. stock market benefits from AI efficiency dividends, leading to profit margin expansion, while the Japanese and Korean markets see significant profit upgrades due to their technology supply chain advantages [2] - Commodities are supported by AI-driven resource pricing reconstruction, physical hoarding demand, and geopolitical "safety premiums," maintaining a long bull market [2] Group 2: Macro Scenario and Investment Strategies - The macro scenario focuses on the continuation of the "AI narrative" and restrained interest rate cuts, with different risk preferences corresponding to four quadrants for investment layout [3] - Risk-seeking strategies can focus on a "strong rate cut + strong AI" combination, emphasizing mid-small cap growth, large cap growth, and gold for high elastic returns [3] - Conservative strategies may adopt a "strong rate cut + weak AI" defensive combination, centered on long bonds, gold, and large cap value stocks for stable returns and risk control [3] Group 3: All-Weather Strategy - The risk parity strategy allows for all-weather allocation, capturing the certainty of returns from bonds and gold during rate cut cycles while hedging against valuation volatility risks from the AI narrative [4] - The current domestic all-weather strategy combines short bonds as a base, with appropriate allocations to gold and equity assets, while closely monitoring uncertainties in overseas monetary policy and other risks [4]