Group 1: Investment Rating - There is no information about the industry investment rating provided in the report. Group 2: Core Views - Last week, the bond market adjusted continuously. Credit bonds experienced an unexpected "steep decline" with larger drops than interest - rate bonds. Affected by the "anti - involution" sentiment, the equity and commodity markets strengthened, causing the bond market to weaken due to the "see - saw" effect. Tightening liquidity in the second half of the week and strong profit - taking in funds and wealth management also contributed to the decline. The central bank's liquidity support on Friday stabilized the bond market temporarily [2][11]. - The adjustment of ultra - long - term credit bonds exceeded that of interest - rate bonds of the same maturity, with the highest adjustment in perpetual and secondary capital (perpetual and Tier 2, "Perp & T2") ultra - long bonds. The yields of AAA/AA + 10Y medium - term notes, AAA/AA + 10Y urban investment bonds, and AAA - 10Y bank Tier 2 capital bonds all increased significantly [3][12]. - The Perp & T2 bond market weakened and showed a "volatility amplifier" characteristic, with the declines of 3Y and above maturities exceeding those of general credit and ultra - long - term credit bonds of the same maturities. The trading sentiment was weak throughout the week, only easing on Friday [4][17]. - The selling intention of ultra - long - term credit bonds was strong, while the buying intention was weak. High - activity trading was mainly concentrated in 3 - 5Y low - quality urban investment bonds and some short - term real estate and financial bonds with flaws [5][22]. - Public funds continued to reduce their credit bond holdings, especially for bonds with maturities over 5 years. However, the turnover rate of 3 - 5Y Perp & T2 bonds increased significantly, indicating a shift to more liquid varieties. The trading value of credit - market - making ETFs decreased by nearly 4 billion, and the growth rate of the trading value of sci - tech innovation bond ETFs slowed down [5][27]. - In the short term, liquidity is still the key strategy. After the steep decline, 3 - 5Y bank Tier 2 capital bonds present certain investment opportunities, and there are also good opportunities for 1 - 3Y low - quality urban investment bond sinking and riding strategies. It is recommended to wait for better entry points for ultra - long - term bonds [5][27]. Group 3: Summary by Directory 1. Bond Market Adjustment and Performance - From July 21 to July 25, 2025, the yields of 1Y - 5Y treasury bonds increased by 3.5BP, 5.5BP, 7.3BP, 7.9BP, and 7.9BP respectively, while the yields of the same - maturity AAA and AA + medium - term notes increased more significantly [11]. - The yields of 10Y AAA/AA + medium - term notes, AAA/AA + urban investment bonds, and AAA - 10Y bank Tier 2 capital bonds increased by 11.99BP, 9.99BP, 11.14BP, 10.14BP, and 14.47BP respectively, while the 10Y treasury bond yield only increased by 6.72BP [3][12]. 2. Curve Shape and Credit Spread Analysis - The steepness of the 1 - 2Y all - grade and 2 - 3Y low - grade curves was the highest, and the steepness was basically the same as that at the end of May. Except for the relatively flat short - end (less than 1 year), the rest of the maturities were at the highest steepness since the current bull market [14]. - The 3Y - 5Y credit spread protection cushion has been strengthened. The yields of 1Y - AAA, 3Y - AAA, 5Y - AAA, 1Y - AA +, 3Y - AA +, 5Y - AA +, 1Y - AA, and 3Y - AA medium - term notes were at the 19.89%, 26.02%, 25.25%, 12.75%, 15.05%, 18.62%, 13.77%, and 17.85% levels since 2024 respectively. The historical quantiles of their credit spreads were 11.14%, 24.66%, 28.64%, 6.89%, 13.52%, 21.48%, 7.69%, and 26.79% respectively [16]. 3. Perp & T2 Bond Market Analysis - The Perp & T2 bond market weakened, and the declines of 3Y and above maturities exceeded those of general credit and ultra - long - term credit bonds of the same maturities. The 1 - 5Y, 7Y, and 10Y AAA - bank Tier 2 capital bond yields increased by 6.73BP, 11.11BP, 13.80BP, 15.27BP, 13.67BP, 14.21BP, and 14.47BP respectively [4][17]. - The trading sentiment was weak throughout the week, only easing on Friday. From July 21 to July 25, the low - valuation trading ratios of Perp & T2 bonds were 4.88%, 7.32%, 0.00%, 0.00%, and 100.00% respectively, and the average trading durations were 0.77 years, 0.63 years, 0.53 years, 0.50 years, and 4.05 years respectively [4][19]. 4. Ultra - long - term Credit Bond Market Analysis - The selling intention of ultra - long - term credit bonds was strong, and the discount trading ratios from July 21 to July 25 were 92.68%, 60.98%, 90.24%, 97.56%, and 65.85% respectively. The discount amplitude was also significant, with some trading at over 5BP [5][22]. - The buying intention of ultra - long - term credit bonds was weak. The low - valuation trading ratios from July 21 to July 25 were 29.27%, 4.88%, 2.44%, 2.44%, and 4.88% respectively, and most of the low - valuation trading amplitudes were within 2BP [5][23]. 5. Institutional Behavior and ETF Analysis - Public funds continued to reduce their credit bond holdings, especially for bonds with maturities over 5 years. However, the turnover rate of 3 - 5Y Perp & T2 bonds increased significantly, indicating a shift to more liquid varieties [5][27]. - Affected by the market adjustment, the trading value of credit - market - making ETFs decreased by nearly 4 billion in a week, and the growth rate of the trading value of sci - tech innovation bond ETFs slowed down, with the subsequent increase in ETFs possibly falling short of expectations [5][27].

Report Overview - Report Type: Fixed Income Report - Release Date: July 2, 2025 - Analysts: Liang Weichao, Li Shukai 1. Industry Investment Rating No industry investment rating is provided in the report. 2. Core View - The ultra-long-term credit bond market cooled down in the last week of June after two consecutive weeks of heating up, but it is only a temporary adjustment without signs of a market reversal. - In the short term, one can be more optimistic about the opportunities to participate in ultra-long-term credit bonds, especially considering the potential incremental space from the expansion of bond ETF products, which may improve the liquidity of ultra-long-term bonds. - However, the thin coupon protection makes them less resistant to fluctuations, and the vulnerability of the liability side of public fund products should not be ignored. A strategy of quick entry and exit and staying ahead of the news may be a good choice [5][26]. 3. Summary by Directory 3.1 Ultra-long Term Temporarily Cools Down - **Market Performance in the Last Week of June**: The bond market entered a consolidation phase, with interest rates first weakening and then strengthening. Credit bonds performed worse than interest rate bonds, with larger declines. Affected by the "stock-bond seesaw" effect, the short - and medium - term yields of interest rate bonds fluctuated downward, while the long - and ultra - long - term yields adjusted. Credit bonds had different trends from interest rate bonds, with relatively larger adjustment amplitudes [3][10]. - **Performance of Ultra-long-term Credit Bonds**: After two consecutive weeks of rising, ultra-long-term credit bonds adjusted, with the adjustment amplitude even exceeding that of the same - term interest rate bonds. The yields of AAA/AA+ 10Y medium - term notes increased by 2.5BP and decreased by 1.5BP respectively, and the yields of AAA/AA+ 10Y urban investment bonds increased by 3.7BP and 1.7BP respectively, while the 10Y treasury bond yield only increased by 0.7BP [3][10]. - **Curve Morphology**: The steepness of the 1 - 2 year for medium - and high - grade bonds and the 2 - 5 year for low - grade bonds was the highest, but overall it was slightly lower than at the end of May, and the short - end remained flat [12]. - **Absolute Yield and Credit Spread**: The coupon value remains low. In terms of credit spreads, there may be opportunities around the 3 - year mark. After a week of adjustment, the short - term 1 - year still lacks cost - effectiveness, while the protection of the 3 - year has strengthened [14]. - **Performance of Perpetual and Tier 2 Bonds**: The market of perpetual and tier 2 bonds weakened. The decline of those within 5 years was similar to that of the same - term general credit bonds, and the performance of those over 7 years was comparable to that of ultra-long - term credit bonds. The yield of 4 - 10 year AAA - bank tier 2 capital bonds increased by 1.98BP, 0.36BP, 1.38BP, 4.01BP, 3.69BP, 3.85BP, and 2.62BP respectively [4][16]. - **Active Trading of Perpetual and Tier 2 Bonds**: The trading sentiment fluctuated throughout the week, being poor on Tuesday and Wednesday and better on the other days. The proportion of low - valuation transactions and the average trading duration also fluctuated. The trading amplitude of low - valuation and discount transactions was small [18][19][21]. - **Selling and Buying Intentions of Ultra-long-term Credit Bonds**: Institutions' selling intention increased compared with the previous week, but the discount amplitude was mostly within 3BP, not an urgent selling situation. The market's buying intention was not weak, with about 43% of the low - valuation transactions having an amplitude of 4BP or more, indicating the existence of allocation demand [5][22][24].

Report Information - Report Type: Fixed Income Report - Release Date: June 26, 2025 - Analysts: Liang Weichao, Li Shukai [2] Core Viewpoints - The recent unexpected upsurge in the ultra - long - term credit bond market is mainly driven by the increasing demand from public funds and insurance funds. Short - term optimism is advisable, especially considering the potential expansion of bond ETF products and the possible improvement in the liquidity of ultra - long - term bonds. However, due to thin coupon protection and the vulnerability of public fund product liability, a quick - in - quick - out strategy may be a good choice [4][28][39] Summary by Directory 1. Ultra - long - term: How far can the market go? Market Performance - Since mid - June, the credit bond market has been on the rise, but the increase is generally lower than that of interest - rate bonds. Interest - rate bonds strengthened last week, with medium - and short - term bonds rising more and ultra - long - term bonds rising less. Credit bonds also rose, but medium - and short - term credit bonds had lower increases, while long - term credit bonds had higher increases than interest - rate bonds of the same term. Ultra - long - term credit bonds unexpectedly recovered, outperforming both same - term interest - rate bonds and general credit bonds [2][9][10] - From June 16 to June 20, 2025, the maturity yields of 1Y, 2Y, 3Y, 4Y, and 5Y treasury bonds decreased by 4.5BP, 4.7BP, 2.6BP, 2.9BP, and 4.2BP respectively. The yields of the same - term AAA medium - term notes decreased by 2.3BP, 0.1BP, 3.1BP, 3.3BP, and 2.7BP respectively, and the yields of AA+ medium - term notes decreased by 2.3BP, 0.1BP, 2.1BP, 3.3BP, and 0.6BP respectively. The yields of AAA/AA+ 10Y medium - term notes decreased by 4.0BP and 2.0BP respectively, and the yields of AAA/AA+ 10Y urban investment bonds decreased by 6.0BP and 9.0BP respectively, while the 10Y treasury bond yield only decreased by 0.4BP [9][10] Curve Shape - The steepness of the 1 - 2 - year period for medium - and high - grade bonds and the 2 - 5 - year period for low - grade bonds is the highest, but it has slightly decreased compared to the end of May, and the short - end remains relatively flat. Taking the yield term structure diagrams of AA+ medium - term notes and AA urban investment bonds as examples, the slopes of the 1 - 2 - year, 2 - 3 - year, and 3 - 5 - year intervals for AA+ medium - term notes are 0.0885, 0.0566, and 0.0603 respectively; for AA urban investment bonds, they are 0.0516, 0.0925, and 0.0775 respectively [11] Absolute Yield and Credit Spread - The coupon value remains low. In terms of credit spreads, there may be opportunities around the 3Y period. From June 16 to June 20, 2025, the estimated maturity yields of 1Y - AAA, 3Y - AAA, 1Y - AA+, 3Y - AA+, and 1Y - AA ChinaBond medium - and short - term notes are at the 7.93%, 4.48%, 5.86%, 4.13%, and 1.37% levels since 2024, at relatively low historical positions, with insufficient coupon protection. The historical quantiles of credit spreads for 1Y - AAA, 3Y - AAA, 1Y - AA+, 3Y - AA+, and 1Y - AA are 8.96%, 30.34%, 6.20%, 36.20%, and 4.82% respectively. After a week of adjustment, the short - end 1Y still has no cost - effectiveness, while the protection cushion for the 3Y period has strengthened [12] Perpetual Bonds - The perpetual bond market also warmed up, but the increase was not prominent. The increase of perpetual bonds within 5Y was similar to that of general credit bonds of the same term, and the performance of those with a term of 7Y and above was comparable to that of ultra - long - term credit bonds. From the perspective of the curve term structure, the curves for terms within 1 year and 7 years and above are relatively flat, and the steepness of the 2 - 6 - year curve is the highest, but the absolute slope is not extremely steep. The yields of 4 - 10Y AAA - bank secondary capital bonds decreased by 3.63BP, 2.39BP, 3.61BP, 4.07BP, 4.20BP, 4.48BP, and 5.10BP respectively. Currently, the curve is relatively close to the situation at the end of last year, and the yields of the ultra - long - term part of 7 years and above are already lower than those at the end of last year, and the gap from the lowest yield point since 2025 is less than 10BP [15] Active Trading - The trading sentiment was good throughout the week, but the market was not extremely hot. From June 16 to June 20, the proportion of low - valuation transactions of perpetual bonds was very stable, with a 100% proportion from Monday to Friday. The average trading durations were 5.08 years, 6.61 years, 6.57 years, 5.59 years, and 4.12 years respectively. The trading amplitude of perpetual bonds with low - valuation transactions was not large, generally within 3BP [18] Ultra - long - term Credit Bonds - Institutions' willingness to sell ultra - long - term credit bonds was very weak. From June 16 to June 20, the proportions of discounted transactions of ultra - long - term credit bonds were 0.00%, 7.50%, 2.50%, 0.00%, and 22.50% respectively. The discount amplitude was basically within 3BP, not a panic - selling situation. The market's willingness to buy ultra - long - term credit bonds increased significantly. The proportions of transactions below the valuation were 40.00%, 50.00%, 60.00%, 70.00%, and 60.00% respectively, making them the most popular credit products last week. Most of the transactions below the valuation were within 5BP [3][20][22] Considerations for Continuing to Participate - **Institutional Behavior**: The current market of ultra - long - term credit bonds is mainly driven by public funds, followed by insurance. Public funds have unstable liability ends, prone to a negative feedback loop. Since mid - to late May, funds and insurance have mainly been buying 7 - 10 - year credit bonds, with public funds being the most powerful buyers. The net buying scales of public funds in the second and third weeks of June were 4700 million and 5700 million yuan respectively, and those of insurance were 2000 million and 3100 million yuan respectively. However, in the short term, the buying demand and liquidity of ultra - long - term credit bonds may continue to improve, mainly due to the new forces of insurance and public ETF products [28][29] - **Product Comparison**: The yield difference between ultra - long - term credit bonds and interest - rate bonds of the same term is not sufficient, and interest - rate bonds have an obvious advantage in liquidity. As of June 20, the yield difference between 10YAAA, AA+ and 10Y treasury bonds is only about 10BP from the lowest point this year [32] - **Income Source**: Compared with the same period last year, the coupon protection of ultra - long - term bonds is significantly insufficient, but the proportion of coupon income contribution is higher than last year. However, the continuous low absolute yield weakens the anti - volatility ability of this product [35][38]