Report Industry Investment Rating No industry investment rating is provided in the report. Report Core Viewpoints - In October, the escalation of Sino-US trade frictions led to increased volatility in global risk assets. The market is waiting for the implementation of tariffs, but the impact may be controllable. After the Sino-US high - level video call on October 18th to restart consultations and the expected APEC summit at the end of October, the short - term emotional pressure on policy gaming may ease, but potential risks such as the results of Sino - US economic and trade consultations and the pressure on China's economic data need attention. The Fed may cut interest rates by 25BP in October, significantly alleviating the inverted Sino - US interest rate spread and opening up room for further loosening of China's monetary policy [2][10][85]. - The domestic economic recovery momentum is weak. Consumption and exports may face pressure. The National Day holiday consumption data shows "volume increase but price slowdown", indicating weak consumer willingness, and the export growth rate in Q4 this year may face pressure [10]. - The current bond market has prominent allocation value, and bond yields may fluctuate downward. The report is bullish on the bond market in October. Considering the domestic fundamentals and external environment, the domestic policy interest rate may be cut by 10 - 20BP in Q4. The preferred bonds for attack are 10Y China Development Bank bonds, 30Y treasury bonds, and 5Y capital bonds. It is predicted that the yield of 10Y treasury bonds will return to around 1.65%, 30Y treasury bonds to 1.9%, and 5Y large - bank secondary capital bonds to 1.9% [4][11][85]. Summary by Directory 1. Macro News - In the first three quarters of 2025, the cumulative increase in social financing scale was 30.09 trillion yuan, 4.42 trillion yuan more than the same period last year. At the end of September, the stock of social financing scale was 437.08 trillion yuan, a year - on - year increase of 8.7%. The net cash injection in the first three quarters was 761.9 billion yuan. At the end of September, the M2 balance was 335.38 trillion yuan, a year - on - year increase of 8.4%, M1 was 113.15 trillion yuan, a year - on - year increase of 7.2%, and M0 was 13.58 trillion yuan, a year - on - year increase of 11.5%. The increase in RMB deposits in the first three quarters was 22.71 trillion yuan, and the balance at the end of September was 324.94 trillion yuan, a year - on - year increase of 8%. The increase in RMB loans in the first three quarters was 14.75 trillion yuan, and the balance at the end of the month was 270.39 trillion yuan, a year - on - year increase of 6.6% [12]. - In September, the CPI was - 0.3% year - on - year, an increase of 0.1 pct from the previous month, mainly dragged down by food and energy prices, and 0.1% month - on - month, an increase of 0.1 pct from the previous month. The year - on - year increase in core CPI expanded to 1.0% in September. The year - on - year decline in PPI narrowed to 2.3% in September, an increase of 0.6 pct from the previous month, and remained flat month - on - month [16]. - In the first three quarters of this year, China's total goods trade imports and exports were 33.61 trillion yuan, a year - on - year increase of 4%. Exports were 19.95 trillion yuan, a year - on - year increase of 7.1%, and imports were 13.66 trillion yuan, a year - on - year decrease of 0.2%. The imports and exports to countries along the "Belt and Road" were 17.37 trillion yuan, a year - on - year increase of 6.2%, accounting for 51.7% of the total imports and exports [21]. - On October 18th, Sino - US economic and trade leaders held a video call and agreed to hold a new round of Sino - US economic and trade consultations as soon as possible [23]. 2. Medium - term High - frequency Data 2.1 Consumption - As of October 12th, the daily average retail volume of passenger car manufacturers increased by 6.7% year - on - year, and the daily average wholesale volume decreased by 0.5% year - on - year. As of October 17th, the total box office revenue of national movies in the past 7 days decreased by 27.3% year - on - year. As of October 10th, the total retail volume of three major household appliances increased by 44.2% year - on - year, and the total retail sales increased by 36.4% year - on - year [24][26]. 2.2 Transportation - As of October 12th, the container throughput of ports increased by 3.4% year - on - year. As of October 17th, the average subway passenger volume in first - tier cities in the past 7 days increased by 2.3% year - on - year. As of October 12th, the postal express pick - up volume decreased by 0.7% year - on - year, and the delivery volume decreased by 5.1% year - on - year. The railway freight volume decreased by 0.2% year - on - year, and the highway truck traffic volume decreased by 15.9% year - on - year [28][35][37]. 2.3 Industrial Operating Rates - As of October 15th, the blast furnace operating rate of major steel enterprises was 78.1%, a year - on - year increase of 2.2 pct. As of October 16th, the average asphalt operating rate remained the same year - on - year, the soda ash operating rate was 84.9%, a year - on - year decrease of 2.5 pct, and the PVC operating rate was 75.6%, a year - on - year decrease of 1.8 pct. As of October 17th, the average PX operating rate was 88.5%, and the average PTA operating rate was 75.5% [42][46]. 2.4 Real Estate - As of October 17th, the total commercial housing transaction area in 30 large and medium - sized cities in the past 7 days decreased by 10.9% year - on - year. As of October 10th, the second - hand housing transaction area in 9 sample cities decreased by 43.6% year - on - year [50][51]. 2.5 Prices - As of October 17th, the average wholesale price of pork decreased by 26.9% year - on - year and 8.3% compared with four weeks ago. The average wholesale price of vegetables decreased by 14.9% year - on - year and 1.4% compared with four weeks ago. The average wholesale price of 6 key fruits decreased by 3.5% year - on - year and increased by 3.1% compared with four weeks ago. The average price of thermal coal at northern ports decreased by 18.3% year - on - year and increased by 3.4% compared with four weeks ago. The average spot price of WTI crude oil decreased by 19.1% year - on - year and 7.7% compared with four weeks ago. The average spot price of rebar decreased by 12.0% year - on - year and 0.6% compared with four weeks ago. The average spot price of iron ore remained flat year - on - year and decreased by 0.8% compared with four weeks ago [53][57][62]. 3. Bond and Foreign Exchange Markets - On October 17th, overnight Shibor and some short - term interest rates showed small fluctuations. Most treasury bond yields increased. The yields of 1 - year, 5 - year, 10 - year, and 30 - year treasury bonds were 1.47%, 1.59%, 1.83%, and 2.20% respectively, with increases of 10.1BP, 0.7BP, 0.4BP, and - 3.2BP compared with October 11th. The yields of 1 - year, 5 - year, 10 - year, and 30 - year China Development Bank bonds were 1.62%, 1.78%, 1.99%, and 2.35% respectively, with changes of + 1.1BP, + 1.0BP, - 0.9BP, and - 0.6BP compared with October 11th. The yields of 1 - year, 5 - year, and 10 - year local government bonds were 1.49%, 1.81%, and 2.02% respectively, with decreases of 4.1BP, 1.8BP, and 3.5BP compared with October 10th. The yields of AAA 1 - month and 1 - year, AA + 1 - month and 1 - year inter - bank certificates of deposit increased compared with October 11th. The yields of 10 - year treasury bonds in the US, Japan, the UK, and Germany decreased compared with October 10th. The central parity rate and spot exchange rate of the US dollar against the RMB changed compared with October 10th [65][69][73]. 4. Institutional Behavior - The duration of medium - and long - term pure bond funds for interest - rate bonds and credit bonds showed a slight upward trend this week. On October 17th, the estimated average duration of interest - rate bond funds was around 5.0 years, and the median was around 4.6 years, an increase of about 0.1 year compared with October 10th. The estimated average duration of credit bond funds was around 2.7 years, and the median was around 2.7 years, an increase of about 0.1 year compared with October 10th [82][83]. 5. Investment Recommendations - The report is bullish on the bond market. The preferred bonds for attack are 10Y China Development Bank bonds, 30Y treasury bonds, and 5Y capital bonds. It is predicted that the yield of 10Y treasury bonds will return to around 1.65%, 30Y treasury bonds to 1.9%, and 5Y large - bank secondary capital bonds to 1.9% [4][11][85].

Group 1 - The report addresses key issues such as analyzing the yield spread between new and old bonds from the perspective of 30Y, 10Y government bonds, and 10Y policy bank bonds, as well as evaluating current trading opportunities for specific bonds [5][13] - The switching of active bonds is influenced by issuance plans, with the scale determining the active status for government bonds, while policy bank bonds rely more on market institutions' behaviors and preferences [5][6] - The new and old bond yield spread exhibits a cyclical pattern of "widening-convergence," where the spread typically widens after a new bond is issued and narrows as liquidity premiums are realized and new bonds are issued [5][14] Group 2 - For 30Y government bonds, the trading focus may remain on the larger scale bond 2500002.IB, while the trading opportunity for the new bond 2500006.IB may be limited due to its yield inversion with the active bond [5][25] - In the case of 10Y government bonds, if the fund redemption fee reform is implemented, the market attention may shift towards this bond type, with the new bond 250016.IB having the potential to become an active bond [31][35] - The 10Y policy bank bonds also show a similar pattern to government bonds, with the yield spread typically widening and then converging after switching, but the opportunities depend more on market sentiment and liquidity changes due to the lack of transparent issuance plans [43][47] Group 3 - The report suggests that investors should focus on structural opportunities, particularly monitoring the transition of 250016.IB to an active bond, especially in the context of potentially increased demand for self-managed bank allocations [48]

Group 1: Report Overview - The report is the Bond Research Weekly for the 4th week of September 2025, focusing on bond market analysis from the perspective of institutional behavior [2][9] Group 2: Investment Rating - Not provided in the report Group 3: Core Viewpoints - The behavior of funds is crucial in the bond market, with their net purchases strongly correlated with interest rate trends. The instability of funds' liability side has increased due to the new sales fee regulations, and the impact of the regulations' implementation should be closely monitored [4][15] - The three institutional behavior changes (funds having nothing left to sell, brokerages closing short positions, and banks "picking up bargains") are favorable for the bond market. Future interest rates may decline due to funds repurchasing bonds, banks increasing allocations, and brokerages closing positions. Currently, interest rate products have a higher probability of success than Tier 2 and credit bonds [4][15] Group 4: Summary by Directory 1. Re - examination after Interest Rate Breakthrough 1.1 Three Changes in Institutional Behavior and Future Outlook - Funds are "sold out": Since Q3, funds have continuously reduced duration. As of September 26, 2025, the median duration of medium - and long - term bond funds (including leverage) dropped to 2.8 years, and the cumulative net purchase of ultra - long treasury bonds (over 10Y) by funds has been negative since early September [3][9] - Brokerages are closing short positions: The borrowing volume of the top three active 10Y treasury bonds remains volatile, while that of 10Y CDB bonds has decreased, indicating brokerage short - position closing before the holiday [10] - Banks are "picking up bargains": Since August, joint - stock banks have continuously bought old 10Y treasury bonds, acting as a "buffer" during the bond market correction. Recently, Tier 2 and perpetual bonds have corrected rapidly, and funds are selling Tier 2 bonds more aggressively [3][14] 1.2 Yield Curve - Treasury bond yields generally increased. On a week - on - week basis, the 1Y yield decreased by 1bp, the 3Y yield increased by 3bp, the 5Y yield changed less than 1bp, the 7Y yield increased by 1bp, the 10Y yield changed less than 1bp, the 15Y yield increased by 1.5bp, and the 30Y yield increased by 2bp. In terms of percentiles, the 1Y dropped to the 10% percentile, and others had various percentile changes [16][18] - CDB bond yields also generally increased. The 1Y yield decreased by 0.5bp, the 3Y yield increased by 2bp, the 5Y yield increased by about 2.3bp, the 7Y yield increased by 4.6bp, the 10Y yield increased by 1.1bp, the 15Y yield increased by about 4.6bp, and the 30Y yield increased by 4.9bp. Percentiles also had corresponding changes [18] 1.3 Term Spread - The spread between treasury bonds and CDB bonds (1Y - DR001, 1Y - DR007) showed a differentiated trend, and the term spread generally widened [19] 2. Bond Market Leverage and Funding Situation 2.1 Leverage Ratio - From September 22 to September 26, 2025, the leverage ratio fluctuated and decreased. As of September 26, it was about 107.06%, up 0.32pct from last Friday and down 0.04pct from Monday [23] 2.2 Repurchase Transactions - From September 22 to September 26, the average daily trading volume of pledged repurchase was about 7.3 trillion yuan, up 0.1 trillion yuan from last week. The average daily trading volume of overnight pledged repurchase was 5.55 trillion yuan, down 0.72 trillion yuan month - on - month. The average overnight trading volume ratio was 75.72%, down 11.92pct month - on - month [27][28] 2.3 Funding Situation - From September 22 to September 26, bank - based fund lending first increased and then decreased. On September 26, the net lending of large and policy banks was 4.09 trillion yuan, and joint - stock, city, and rural commercial banks had a net borrowing of 0.28 trillion yuan. The main fund borrowers were brokerages, and money market funds' lending decreased. DR007, R007, 1YFR007, and 5YFR007 all fluctuated and increased, with different changes compared to last Friday [30] 3. Duration of Medium - and Long - Term Bond Funds 3.1 Overall Duration - From September 22 to September 26, the median duration of medium - and long - term bond funds was 2.68 years (de - leveraged) and 2.79 years (including leverage). On September 26, the median duration (de - leveraged) remained unchanged from last Friday, and the median duration (including leverage) decreased by 0.01 year [41] 3.2 Duration by Bond Fund Type - As of September 26, the median duration of interest - rate bond funds (including leverage) dropped to 3.53 years, down 0.01 year from last Friday; the median duration of credit bond funds (including leverage) dropped to 2.52 years, up 0.01 year from last Friday. The de - leveraged durations also had corresponding changes [44] 4. Category Strategy Comparison - As of September 26, the Sino - US spread generally narrowed, and the implied tax rate (10Y CDB - treasury bond spread) narrowed at the short end and widened at the medium - and long - ends [48] 5. Bond Lending Balance Changes - On September 26, the lending concentration of active 10Y treasury bonds and 10Y CDB bonds increased, that of secondary active 10Y CDB bonds and active 30Y treasury bonds decreased, and that of secondary active 10Y treasury bonds remained unchanged. Except for brokerages, all other institutional lending concentrations increased [50]

Group 1 - The core viewpoint indicates that the stock market has decoupled from the bond market, with a continued bullish outlook on bonds [1] - The overall profit growth rate for all A-shares in the first half of 2025 has not improved compared to the first quarter, with revenue growth remaining sluggish [1] - Since September 24, 2024, the current stock bull market has lasted nearly one year, with the All A Index doubling in value [1] Group 2 - The bond market has seen a net issuance of 14.3 trillion yuan in the first seven months of this year, with banks increasing their bond investments significantly [1] - The stock bull market has not impacted the total deposits in the banking system, indicating a structural shift in financing needs [1] - The convertible bond index is nearing historical highs, suggesting a cautious optimism for convertible bonds, with future attention on stock market changes and approval for new convertible bond issuances [2] Group 3 - The recommendation is to cherish yields above 2% for 30-year government bonds and 5-year capital bonds, as there may be opportunities to approach 1.6% for 10-year government bonds in the coming months [2] - The recent performance of the Ping An Company Bond ETF (511030) has shown the best control over drawdowns, indicating relative stability and manageable risk [2]

Core Viewpoint - The article emphasizes that trends are accelerated by news stimuli rather than changed, indicating that current market movements are aligned with broader trends [1]. Group 1: Market Conditions - The central bank conducted a 340 billion yuan reverse repurchase operation, with 5,259 billion yuan of reverse repos maturing today, resulting in a net withdrawal of 4,919 billion yuan [2]. - The funding environment remains balanced and loose, with the DR001 rate around 1.31% and DR007 at approximately 1.42% [3]. - The interbank funding rates show a slight decline, with R001 at 1.36% (down 1 basis point) and R007 at 1.49% (up 97 basis points) [4]. Group 2: Bond Market Dynamics - The bond market sentiment is stable, with the 10-year government bond yield fluctuating around 1.64% after opening flat [5]. - Despite rumors of regulatory investigations into short-term bond funds buying long-term government bonds, market enthusiasm remains high, with the 30-year government bond becoming the most active [6]. - The 30-year government bond recorded over 1,300 transactions, while the 10-year government bonds saw over 1,000 transactions, indicating a shift in investor preference towards ultra-long bonds [6].

Group 1: Core Insights - The report indicates a significant increase in net buying of 7-10 year long-term bonds and bonds over 10 years, with weekly net buying intensity reaching the second highest and highest levels of the year respectively [1] - The overall funding market has warmed up, with both net inflow and outflow amounts rising, and an increase in the leverage ratio in the interbank bond market [2] - The secondary market shows improved activity, particularly in ultra-long bonds, with a rise in turnover rates for 30-year government bonds and an increase in average duration for medium to long-term pure bond funds [3] Group 2: Market Dynamics - In the primary market, there was a noticeable "marginal" sentiment, with an increase in the issuance of government bonds and a rise in the bid-to-cover ratio for government bonds, while the ratio for policy financial bonds decreased [2] - Major institutional behaviors indicate that funds are aggressively allocating to long-term and ultra-long-term bonds, while rural commercial banks are selling off across all maturities, particularly in the 7-10 year and over 10-year segments [3] - The scale of wealth management products in June did not show the typical seasonal decline, with a slight overall decrease in the week of June 15, while fund sizes increased significantly compared to previous months [4]

Funding Market - The large banks' lending scale rapidly increased in the first half of last week but declined after the reserve requirement ratio cut took effect [1] - The overall funding market cooled down in the past week, with net borrowing amounts turning negative for major borrowers and net lending amounts rising for major lenders [1] - The total repo balance in the interbank market increased, while the leverage ratio in the interbank bond market remained stable [1] Primary Market - The issuance heat in the primary market showed divergence, with one 10-year government bond, two 10-year policy bank bonds, and one 10-year other policy financial bond issued in the past week [1] - The bid-to-cover ratio for government bonds and policy bank bonds decreased, while it increased for other policy financial bonds [1] - The price spread between primary and secondary markets narrowed for government and policy bank bonds, while it widened for other policy financial bonds [1] Secondary Market - The overall heat in the secondary market improved, with an increase in the turnover rate of ultra-long bonds and stronger buying interest for short-term bonds [2] - The total borrowing volume of bonds increased, and the proportion of active bonds rose [2] - Major buyers increased net purchases of short and medium-term bonds while reducing net purchases of long and ultra-long bonds [2] Wealth Management and Fund Scale - Since May, the growth of wealth management scale has been weaker than historical averages, with a cumulative increase of 164.4 billion yuan as of May 18 [3] - The fund scale (net asset value) increased by 83.2 billion yuan in May, with equity and bond funds increasing by 56.1 billion yuan and 25.3 billion yuan respectively [3] - The issuance of new bond funds saw a significant rise compared to the previous week [3]