Report Industry Investment Rating No relevant content provided. Core View of the Report - The credit bond market this week showed characteristics of "the end of spread compression, intensified liquidity stratification, and the initial appearance of policy disturbances." The market oscillated between policy expectations and capital - market fluctuations, with institutional behavior shifting from being dominated by trading desks to being supported by allocation desks. The strategy suggests seizing the "tail - end" market opportunities. [5] Summary by Related Catalogs Policy Dynamics and Market Hotspots - **Central Bank's Reverse Repo Operations**: From August 4th to 8th, 2025, the central bank had a net回笼 of 41 billion yuan in the first half - week and then conducted a 70 - billion - yuan outright reverse repo on Friday, switching to a net injection of 16.35 billion yuan for the whole week. This operation balanced government bond supply, tax - period disturbances, and financial stability while leaving room for subsequent policy tool innovation. [2] - **Credit Bond Issuance and Yield Changes** - **Primary Market**: From August 4th to 8th, the issuance and net financing scale of general credit bonds increased significantly compared to the previous week. The issuance amount of general credit bonds was 366.7 billion yuan, a week - on - week increase of 188 billion yuan; the net financing was 240.4 billion yuan, a week - on - week increase of 186 billion yuan. The weighted issuance term was 3.36 years, a week - on - week decrease of 0.75 years, and the weighted issuance interest rate was 1.65%, a week - on - week decrease of 0.29 percentage points. [2] - **Secondary Market**: The turnover rate of general credit bonds decreased week - on - week, with the turnover rate of general credit bonds with a maturity of less than 1 year slightly increasing, and that of other maturities significantly decreasing. The turnover rate of bank Tier 2 and perpetual bonds also decreased, possibly due to some institutions shifting to AA - and below - rated Tier 2 and perpetual bonds. [3] - **Yield and Spread**: As of August 8th, the average yields of medium - and short - term notes, urban investment bonds, Tier 2 capital bonds, and perpetual bonds of AAA - rated bonds at various maturities all decreased week - on - week. Credit spreads across the board compressed, with 1 - year - term spreads decreasing by 3 - 5BP, 3 - year - term spreads decreasing by 1 - 4BP, and 5 - year - term spreads decreasing by 2 - 3BP. [3] - **Bank Tier 2 and Perpetual Bonds**: The yields of bank Tier 2 and perpetual bonds decreased across the board this week, with medium - and low - grade varieties performing slightly better. The spreads of 3 - 5 - year high - grade varieties decreased less. [4] - **Regional and Industry Analysis**: Most provincial urban investment bond spreads decreased by 2 - 3BP, with Inner Mongolia, Liaoning, and Qinghai having the largest decreases of 6 - 7BP. Most industry spreads of industrial bonds widened slightly this week, with the AA - rated steel industry having the largest spread widening of 5.5BP. [4] Credit Strategy - Suggest focusing on the sinking opportunities of 2 - 3 - year AA/AA - rated urban investment bonds and short - term varieties in the steel industry. For bank Tier 2 and perpetual bonds, currently, the 3 - 5Y large - bank capital bonds have good liquidity, and capital gains can be gambled on. [5]

Group 1 - The report indicates that credit bond yields across various maturities continue to decline, with short-term yields decreasing more than long-term ones, and lower-rated bonds experiencing greater yield reductions than higher-rated ones [1][9] - As of August 8, the credit spreads for 3Y/AAA, AAA-, and AA+ short-term bonds are 18.81BP, 22.81BP, and 26.81BP respectively, which are close to the year's lowest points [1][9] - The current environment is favorable for credit bonds, with a high carry opportunity and stable funding conditions, suggesting further compression of credit spreads in the last three weeks of August [1][9] Group 2 - The report highlights that industrial investment and major project construction are becoming new drivers for regional economic development, with infrastructure projects in transportation, water conservancy, and energy expected to play significant roles [4][18] - It emphasizes the need for local governments to balance between reducing debt and increasing investment in infrastructure to stimulate employment and economic growth [18][19] - The report notes that there is substantial growth potential in industrial investments, particularly in high-tech sectors, which can provide significant returns [19][20] Group 3 - The report suggests that investors should focus on low-duration, high-rated, and highly liquid credit bonds, especially those with significant recovery potential, as the market adjusts [2][13] - It identifies specific bonds with high recovery potential, including 20 public bonds with implied ratings of AA+ and above, which have shown active trading and recovery space of over 12BP [3][16] - The report advises caution regarding long-term credit bonds, as the sustainability of the current credit spread compression is uncertain [2][13]

1. Report Industry Investment Rating The provided content does not mention the industry investment rating. 2. Core Viewpoints of the Report - The core purposes of the new bond VAT policy may include two aspects: unifying the bond market tax system and increasing government tax revenue to relieve fiscal pressure [2][15]. - The move to resume VAT collection on bonds may signal a gradual reduction in tax - incentives for the investment demand side in the bond and capital markets, and the reduction rhythm is affected by the maturity of asset categories and macro - economic and fiscal factors [2][15]. 3. Summary According to the Directory 3.1 Bond VAT Adjustment Policy Interpretation - Since August 8, 2025, interest income from newly - issued government bonds, local government bonds, and financial bonds will be subject to VAT, while previously issued bonds will remain tax - exempt until maturity. For new bonds, ordinary self - operating institutions and asset management products will be taxed at 6% and 3% respectively [1][14]. - The policy aims to unify the bond market tax system and increase government revenue. It may also indicate a gradual reduction in tax incentives in the bond and capital markets, with the reduction rhythm affected by asset category maturity and macro - economic and fiscal conditions [2][15]. 3.2 Impact of the New Bond VAT Policy on the Credit Bond Market 3.2.1 Impact Logic and Magnitude Calculation - After interest income from interest - rate bonds loses the VAT exemption advantage, the relative value of credit bonds increases. The spread between self - operating departments' credit bonds and other bonds narrows by about 10BP, and the relative value of credit bonds may increase by 5 - 15BP for self - operating departments and 3 - 10BP for asset management products and public funds [3][20]. - The credit spread of credit bonds compared to government bonds may decline due to the increase in the benchmark rate of newly - issued government bonds. The new policy may attract more funds from local government bonds and financial bonds to credit bonds, and the market sentiment after the policy implementation will affect the timing of credit bond allocation [3][21]. 3.2.2 Impact on Different Financial Institutions - For public funds, although the VAT rate on bond interest income rises to 3%, their investment advantage in bonds still exists and may attract more funds into the credit bond market, bringing trading volume to sub - categories of credit bonds [6][29]. - For self - operating departments, with the VAT rate rising to 6%, they may increase credit bond allocation through funds, and pay more attention to urban investment bonds and industrial bonds [6][29]. - For other asset management institutions, with the VAT rate rising to 3%, they may invest in public funds or private asset management products and slightly increase the proportion of credit bonds and inter - bank certificates of deposit [6][30]. 3.3 Impact of the New Bond VAT Policy on the Bank's Perpetual and Tier - 2 Bonds Market 3.3.1 Impact Logic and Magnitude Calculation - In the short - term, due to the tax - exemption advantage of existing bonds, the demand for bank perpetual and tier - 2 bonds in the secondary market will increase, and the yields of 5 - year tier - 2 capital bonds (AAA -) and 5 - year perpetual bonds (AAA -) will decline by 11.07BP and 11.44BP respectively. In the long - term, the policy may have little impact on bank perpetual and tier - 2 bonds [7][32]. 3.3.2 Impact on Different Financial Institutions - Public funds still have the motivation to allocate high - liquidity bank perpetual and tier - 2 bonds and can improve portfolio liquidity through credit bond ETFs [8][35]. - Self - operating departments may increase the allocation of bank perpetual and tier - 2 bonds and strengthen entrusted investment to reduce tax costs [8][35]. - Other asset management institutions may adopt a strategy of "shortening duration + exploring individual bonds" to deal with the tax policy change [8][36].

Report Overview - Report Date: July 28, 2025 [1] - Research Team: Fixed Income Research Team [2] - Analysts: Chen Xi, Liu Rui [3] Investment Rating - The report does not mention the industry investment rating. Core Views - Credit bond issuance and net financing have recovered, and trading activity has increased [1][4] - The science and technology innovation bond market is in the second half, with room for spread compression [4] - Credit strategy focuses on balancing coupon and risk, increasing allocation to short - term high - coupon city investment bonds and 3Y/AAA - secondary capital bonds [6] Summary by Directory Policy and Market Trends - On July 18, 2025, the Shenzhen Stock Exchange issued a notice on pilot corporate bond re - issuance and asset - backed securities expansion business, aiming to enhance market depth and optimize financing efficiency [4] - The science and technology innovation bond market is in the second half. Driven by the expansion of underlying assets and policy guidance in the second half of the year, there is still room for spread compression [4] Primary Issuance - From July 21 - 25, the issuance amount of general credit bonds was 351 billion yuan, a week - on - week increase of 70.9 billion yuan; net financing was 128 billion yuan, a week - on - week increase of 83 billion yuan [4] - Among them, the issuance amount of urban investment bonds was 107.7 billion yuan, a week - on - week increase of 10.9 billion yuan; net financing was 29.8 billion yuan, a week - on - week increase of 27.5 billion yuan [4] - The issuance amount of industrial bonds was 243.2 billion yuan, a week - on - week increase of 60.1 billion yuan; net financing was 98.2 billion yuan, a week - on - week increase of 55.8 billion yuan [4] - The weighted issuance term of general credit bonds was 4.21 years, a week - on - week increase of 0.88 years; the weighted issuance interest rate was 1.75%, a week - on - week decrease of 0.09 pct [4] Secondary Trading - The turnover rates of general credit bonds with maturities of less than 1 year and 1 - 3 years increased, while those of other maturities decreased [5] - The turnover rate of bank Tier 2 and perpetual bonds increased overall, with a significant increase in the AAA - level, and a decrease in the AA+ and AA levels [5] Spread Tracking - As of July 25, the average yields of medium - and short - term notes, urban investment bonds, secondary capital bonds, and perpetual bonds with AAA ratings at various maturities were at historically low levels [5] - For urban investment bonds, most spreads widened, except for some 3 - year and 5 - year varieties [5] - For bank Tier 2 and perpetual bonds, the spreads of 3Y and 5Y levels widened, while the 1Y spread narrowed [5] - Regionally, most provincial urban investment bond spreads widened, with Heilongjiang having the largest widening amplitude of 11BP [5] - In the industrial bond sector, most industry spreads narrowed or remained flat, except for the AA - level chemical and AA - level building materials industries [6] Credit Strategy - Balance coupon and risk, and give priority to short - term high - rating varieties. Pay attention to liquidity premium opportunities at the ultra - long end and beware of policy and credit event disturbances [6] - Increase allocation to short - term high - coupon urban investment bonds and industrial bonds with a duration of less than 3 years [6] - Enter the ultra - long - term credit bond market after interest rate adjustments, and focus on the liquidity premium of insurance sub - debt and science and technology innovation bond ETF component bonds [6] - For bank Tier 2 and perpetual bonds, pay attention to changes in the capital market and the overall sentiment of the credit bond allocation end when considering sector games [6]

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report The current spread compression space of high - quality large - bank capital bonds is limited, and although the 10 - year variety has relative value, the overall return space is also low. Therefore, to increase returns, it is recommended to implement a moderate credit - sinking strategy for bank perpetual and secondary capital bonds (referred to as "two - tier and perpetual bonds") under strict risk control, avoiding provinces with a large number of high - risk institutions [6][40]. 3. Summary by Relevant Catalogs 3.1 Bank Two - tier and Perpetual Bond Investment Screening Framework - **Issuer's Subject Qualifications and Operating Indicators**: A core risk - control framework covering six dimensions including equity nature, asset scale, operating region, asset quality, operating performance, and inter - bank liability ratio is constructed. It focuses on asset scale and central and state - owned enterprise equity nature, controls key operating indicators such as core tier - one capital adequacy ratio and ROE, and avoids provinces with a large number of high - risk institutions [5][7]. - **Central Bank's Financial Institution Rating Results**: As of the end of 2023, banks within the safety boundary accounted for 98.22% of the banking system's asset scale, and 357 banks were in a high - risk state. Large banks are in the "green zone", while some rural and urban commercial banks are high - risk banks [5][8]. - **Domestic Systemically Important Banks (D - SIBs) List**: In 2023, 20 domestic systemically important banks were identified, including 6 state - owned commercial banks, 9 joint - stock commercial banks, and 5 city commercial banks. They can all be included in the investment white list due to their low overall risk level [6][16]. - **Historical Non - Active Redemption of Bank Two - tier and Perpetual Bonds**: As of July 19, 2025, there have been 72 cases of secondary capital bonds not actively redeemed, with a total non - redemption amount of 50.677 billion yuan. Rural commercial banks account for 73.61% of the issuers, and regions such as Liaoning, Shandong, and Hubei have a high number of non - redemption cases [6][17]. - **Regional Fiscal Revenue Quality and Debt Pressure**: It is recommended to prioritize provinces with high - quality fiscal revenue and controllable debt, such as Shanghai, Beijing, Guangdong, and Fujian, and avoid high - risk regions like Liaoning, Gansu, and Inner Mongolia [6][29]. 3.2 Investment Opportunities for Two - tier and Perpetual Bonds under the Moderate Credit - Sinking Strategy - **Issuer Selection Criteria**: Focus on state - owned and central - enterprise - controlled banks with an asset scale between 400 billion and 1 trillion yuan, with a core tier - one capital adequacy ratio of not less than 7.5%, ROE higher than 3%, an inter - bank liability ratio within 30%, and avoid provinces with a large number of high - risk institutions [33]. - **Recommended Investment Targets**: Recommended targets include 25 Tianjin Rural Commercial Bank Secondary Capital Bond 01, 25 Guangxi Beibu Gulf Bank Secondary Capital Bond 01, and other bonds with a yield of over 2.5% [40].

Group 1 - The report indicates that since late May, the long-term credit bond market has seen significant net buying activity, reflecting high market participation enthusiasm [1][9] - The long-term credit bond market began to show independent trends in both last year and this year under extreme conditions of short-term yield compression, leading to a focus on duration for yield [9][12] - The report highlights that the current long-term credit bond market is influenced by the "stock-bond" effect, with institutions being cautious and focusing on profit-taking points [1][9] Group 2 - For the 5-7 year medium-term bonds, institutional net buying has significantly increased since late May, with peak net buying volumes reaching around 3.5 billion [2][14] - In the 7-10 year medium-term bonds, the fluctuation of fund net buying is a crucial factor affecting credit spreads, with insurance companies showing stronger net buying compared to last year [2][17] - For bonds over 10 years, the participation of funds has been limited this year, with the main buying force coming from insurance and other product categories, resulting in weaker effects on credit spread compression [2][18] Group 3 - The report states that the compression of credit spreads has reached an extreme level for short-term bonds (3 years and under), while there is still some room for long-term bonds (5 years and above) [3][23] - The report suggests that if funds continue to buy long-term credit bonds significantly, it could further compress spreads; otherwise, the compression potential may be limited [3][23] - The report identifies three key points for profit-taking in long-term credit bonds, including observing fund buying trends and credit spread movements [3][9] Group 4 - The report recommends that institutions with weaker liability stability should focus on 2-3 year low-grade bonds and 4-5 year high-yield bonds, while those with stronger stability should actively allocate long-term bonds [4][9] - The yield range for 7-year AA+ rated bonds and 10-15 year AA+ rated bonds is noted to be between 2.07% and 2.39%, indicating potential for yield exploration [4][9]

Core Viewpoint - The article discusses the challenges faced by bank wealth management subsidiaries in optimizing asset allocation strategies due to regulatory changes that require a return to net value-based pricing for financial products, making it difficult to achieve high returns, stable valuations, and high liquidity simultaneously [1][4][11]. Regulatory Changes - Regulatory authorities have mandated the cessation of self-built valuation models used by bank wealth management subsidiaries, which previously smoothed net value fluctuations of financial products [3][11]. - The new regulations require the use of standardized valuation methods, such as those provided by the China Bond Pricing Center and the China Securities Index [11][12]. Impact on Investment Strategies - In response to regulatory changes, banks are reducing their holdings of long-term bonds and low-rated credit bonds, opting instead for short-term, high-rated bonds to minimize net value fluctuations [4][18]. - The overall bond investment strategy is shifting towards more liquid assets to enhance the stability of financial product valuations [18][22]. Investor Education - Increased pressure on investor education has been noted, as banks must help clients understand the implications of net value fluctuations and avoid panic selling during periods of volatility [2][10]. Market Dynamics - The article highlights a significant decline in the net buying of long-term credit bonds by bank wealth management subsidiaries in June, indicating a strategic shift in response to market conditions and regulatory pressures [22]. - The overall bond yield environment has also influenced banks to diversify into other high-dividend investment products to maintain overall returns [19][22].

Core Viewpoint - The regulatory changes regarding self-built valuation models for bank wealth management subsidiaries have increased the pressure on investor education and have led to significant adjustments in investment strategies to manage net asset value fluctuations [2][6][12]. Group 1: Regulatory Changes and Impact - Regulatory authorities have prohibited bank wealth management subsidiaries from using self-built valuation models, requiring them to adopt standardized valuation methods [6][4]. - The implementation of these regulations aims to restore the fundamental nature of net asset value and ensure fair competition among wealth management institutions [6][4]. - As of the end of May, the average annualized yield of open-ended fixed-income wealth management products decreased to 2.84%, down 0.35 percentage points from April, reflecting the impact of market adjustments [2]. Group 2: Investment Strategy Adjustments - Wealth management subsidiaries are shifting their investment strategies by reducing long-term bonds and low-rated credit bonds while increasing short-term high-rated bonds to mitigate net asset value fluctuations [3][11]. - The need to comply with regulatory requirements has led to a significant reduction in the net buying of long-term credit bonds, with net purchases dropping from 27 billion to 9 billion for 7-10 year bonds in June [13]. - The overall bond yield decline has prompted wealth management subsidiaries to explore alternative high-dividend investment options such as REITs and preferred stocks to enhance overall product returns [12]. Group 3: Challenges in Valuation and Investor Education - The self-built valuation models previously used by wealth management subsidiaries aimed to smooth out net asset value fluctuations but have been deemed unfair and misleading [5][4]. - Investor education has become increasingly important as fluctuations in net asset values have led to irrational redemption behaviors among investors [2]. - Wealth management subsidiaries are now required to closely monitor and adjust their asset allocation strategies in response to market conditions to maintain investor confidence [11][10].

Report Industry Investment Rating No relevant content provided. Report's Core View - The logic of being bullish on credit bonds with a yield of over 2% remains unchanged this week. It is recommended to moderately lower the credit quality and extend the duration, especially focusing on medium- to long-term high-coupon urban investment bonds and bank Tier 2 and perpetual bonds with a yield of over 2% and good liquidity [2][43]. Summary by Directory 1. Primary Market 1.1 Net Financing Scale - The net financing of traditional credit bonds (excluding asset-backed securities) was 153.6 billion yuan this week, a decrease of 110.9 billion yuan compared to last week. The total issuance was 427.5 billion yuan, a decrease of 150.7 billion yuan, and the total repayment was 273.9 billion yuan, a decrease of 39.8 billion yuan. The net financing of asset-backed securities was 8.8 billion yuan, a decrease of 24.3 billion yuan [7]. - By product type, the net financing of urban investment bonds was 49.5 billion yuan, an increase of 32.5 billion yuan; the net financing of industrial bonds was 48.9 billion yuan, a decrease of 97.3 billion yuan; and the net financing of financial bonds was 55.2 billion yuan, a decrease of 46.2 billion yuan [7]. - In terms of issuance and redemption quantity, the issuance of urban investment bonds increased by 4, and the redemption decreased by 17; the issuance of industrial bonds decreased by 21, and the redemption remained unchanged; the issuance of financial bonds decreased by 6, and the redemption decreased by 16 [9]. 1.2 Issuance Cost - The issuance rates of AA industrial bonds, AA+ and AAA financial bonds increased significantly, while the issuance rate of AA+ industrial bonds decreased. The issuance rates of other bonds with different ratings changed by no more than 4BP [15]. - Specifically, the issuance rate of AA+ financial bonds increased by 63BP, mainly due to the high issuance costs and large issuance scales of bonds such as "25 Chouzhou Commercial Bank Tier 2 Capital Bond 01" and "25 Chengde Bank Perpetual Bond 01". The issuance rate of AAA financial bonds increased by 20BP, mainly due to the 30 billion yuan issuance of "25 Minsheng Bank Perpetual Bond 01" with an issuance rate of 2.3%. The issuance rate of AA industrial bonds increased by 18BP, mainly due to the high issuance rates of bonds such as "25 Jingjiang Beichen MTN003" and "25 Zhongtou 01". The issuance rate of AA+ industrial bonds decreased by 15BP, mainly due to the large number of bonds issued with a coupon rate below 2.3% [15]. 2. Secondary Market 2.1 Trading Volume - The trading volume of credit bonds (excluding asset-backed securities) decreased by 129.9 billion yuan compared to last week. The trading volume of urban investment bonds was 293.6 billion yuan, a decrease of 4 billion yuan; the trading volume of industrial bonds was 432.1 billion yuan, a decrease of 35.3 billion yuan; the trading volume of financial bonds was 511.6 billion yuan, a decrease of 90.5 billion yuan. The trading volume of asset-backed securities was 26.5 billion yuan, an increase of 5.7 billion yuan [16]. - In terms of turnover rate, the turnover rate of traditional credit bonds decreased overall, while the turnover rate of asset-backed securities increased. The turnover rate of urban investment bonds was 1.89%, a decrease of 0.03 percentage points; the turnover rate of industrial bonds was 2.49%, a decrease of 0.22 percentage points; the turnover rate of financial bonds was 3.54%, a decrease of 0.63 percentage points. The turnover rate of asset-backed securities was 0.75%, an increase of 0.13 percentage points [17]. 2.2 Yield - The yield of credit bonds fluctuated slightly this week, with the long - end performing better than the medium - and short - ends. Specifically, the yields of AA+, AAA - and AAA bonds with a maturity of over 10 years decreased by 2BP, 3BP and 1BP respectively compared to last week. The yields of AA+, AAA - bonds with a maturity of 3 - 5 years and AA+ bonds with a maturity of 5 - 7 years decreased by less than 1BP. The yields of credit bonds with other ratings and maturities increased by 0 - 4BP [21]. - By product type, taking the AA+ 5 - year bonds of each product as an example, the yields of different products showed mixed trends. Among industrial bonds, the yields of privately - issued industrial bonds and extendible industrial bonds decreased by 4BP and increased by 1BP respectively compared to last week. Among urban investment bonds, the yield of AA+ 5 - year urban investment bonds increased by 1BP. Among financial bonds, the yields of commercial bank ordinary bonds and Tier 2 capital bonds decreased by 1BP and increased by 1BP respectively. Among asset - backed securities, the yield of AA+ 5 - year asset - backed securities increased by less than 1BP [22]. 2.3 Credit Spread - Overall, the credit spreads of most industries fluctuated slightly this week, and the credit spread of the AA+ electronics industry contracted significantly. Specifically, the credit spread of the AA real estate industry widened by 14BP; the credit spreads of the AA+ electronics and electrical equipment industries contracted by 62BP and 9BP respectively, and the credit spread of the steel industry widened by 12BP; the credit spread of the AAA electrical equipment industry contracted by 9BP. The fluctuations of credit spreads of bonds in other industries and ratings were no more than 5BP [23]. 2.3.1 Urban Investment Bonds - By maturity, the credit spreads of urban investment bonds within 5 years widened slightly, while those over 5 years compressed slightly. Specifically, the credit spread of 0.5 - 1 - year urban investment bonds was 43BP, an increase of 2BP; the credit spread of 1 - 3 - year urban investment bonds was 44BP, an increase of 2BP; the credit spread of 3 - 5 - year urban investment bonds was 63BP, an increase of 1BP; the credit spread of 5 - 10 - year urban investment bonds was 53BP, a decrease of 1BP; the credit spread of over 10 - year urban investment bonds was 43BP, a decrease of 4BP [27]. - By region, the credit spreads of AA urban investment bonds in Shanxi and AAA urban investment bonds in Jilin widened significantly, while the credit spread of AA urban investment bonds in Liaoning compressed by 6BP. The fluctuations in other regions were relatively small [28]. 2.3.2 Industrial Bonds - The credit spreads of industrial bonds showed mixed trends this week, and the 5 - year industrial bonds performed well overall. Specifically, the credit spreads of 5 - year AAA -, AA+ and AA privately - issued industrial bonds compressed by 1BP, 4BP and 4BP respectively, and the credit spreads of 5 - year AAA - and AA extendible industrial bonds compressed by 2BP and 3BP respectively. The credit spreads of industrial bonds with other maturities and different subject ratings mostly widened compared to last week, with a fluctuation range of 0 - 3BP [31]. 2.3.3 Bank Capital Bonds - The credit spreads of bank Tier 2 and perpetual bonds mostly widened slightly this week. By product and maturity, for bank Tier 2 capital bonds, the credit spreads of AAA -, AA+ and AA bonds with a maturity of 1 year widened by 3BP, 2BP and 2BP respectively, and the credit spreads of AAA -, AA+ and AA bonds with a maturity of 10 years widened by 2BP, 2BP and 2BP respectively. For bank perpetual bonds, the credit spreads of AAA -, AA+ and AA bonds with a maturity of 1 year widened by 3BP, 3BP and 4BP respectively, and the credit spreads of AAA -, AA+ and AA bonds with a maturity of 10 years widened by 2BP, 2BP and 2BP respectively [35]. 3. This Week's Bond Market Sentiment - Due to the concentrated disclosure of bond follow - up rating reports near the end of June, there were many credit negative events this week. - Convertible bond negative sentiment: 16 issuers had their ratings downgraded, and the ratings of 16 convertible bonds they issued were also downgraded; 2 issuers were put on the watch list, and the 2 convertible bonds they issued were also put on the watch list [38]. - Other credit negatives: 3 issuers had their ratings downgraded, 37 bond issues had their ratings downgraded, and 10 bond issues had their implied ratings downgraded. Guizhou Shuicheng Economic Development Zone High - tech Development Investment Co., Ltd. was put on the issuer watch list, and its "18 Shuicheng High - tech Bond" was put on the bond watch list [40]. 4. Investment Suggestion - The central bank achieved a net injection of 126.72 billion yuan this week, and DR001 decreased from 1.35% at the beginning of the week to 1.29%. - Overall, the credit spreads of most industries fluctuated slightly, the credit spread of the AA+ electronics industry contracted significantly. The credit spreads of urban investment bonds within 5 years widened slightly, while those over 5 years compressed slightly. The credit spreads of industrial bonds showed mixed trends, and the 5 - year industrial bonds performed well. The credit spreads of bank Tier 2 and perpetual bonds mostly widened slightly. The yields of credit bonds fluctuated slightly, with the long - end performing better than the medium - and short - ends. - It is recommended to continue to focus on bank Tier 2 and perpetual bonds of banks such as Minsheng Bank, Bohai Bank and Hengfeng Bank, and urban investment bonds in regions such as Yunnan, Shaanxi and Tianjin, such as Yunnan Construction Investment Holding Group Co., Ltd., Xianyang Urban Development Group Co., Ltd. and Tianjin Bohai State - owned Assets Management Co., Ltd., which have relatively high static coupon rates [43].

Credit Spread Performance - In May, the supply of credit bonds decreased, leading to a general decline in credit spreads, with lower-rated credit bonds experiencing a more significant narrowing [1] - The AAA-rated industrial bonds saw a uniform narrowing of credit spreads across all sectors, with the real estate sector showing the largest reduction of 18.98 basis points, while the financial holding sector had the smallest reduction of 2.36 basis points [8][9] - For private placement bonds, the pharmaceutical and biological sector had the largest narrowing of 17.18 basis points, while the environmental protection sector had the smallest at 0.99 basis points [8][9] City Investment Bonds - In May, credit spreads for city investment bonds across major ratings and maturities all declined, with the largest narrowing observed in Qinghai province for both public and private bonds [1] - The overall trend indicates that credit spreads for city investment bonds are moving downward across various regions and issuer levels [1] Financial Bonds - The credit spreads for bank perpetual bonds and other financial instruments generally narrowed, with most varieties experiencing a decrease, although some maturity spreads widened [1] - Securities companies' subordinated bonds and insurance companies' capital replenishment bonds saw a complete decline in credit spreads during the month [1] Historical Context - By the end of May, various types of credit bonds maintained historically low credit spreads, particularly for short-duration non-financial credit bonds and short-duration financial bonds, while medium to long-term financial bonds remained at relatively high historical percentiles [1][6]