1. Report Industry Investment Rating No information is provided regarding the industry investment rating in the given content. 2. Core Viewpoints of the Report - In late February, the bond market showed an oscillatory recovery, with short - end credit products outperforming long - end ones. Credit bonds outperformed interest - rate bonds and Tier 2 capital bonds, and the short - end credit market was stronger [5][10]. - Amortized bond funds are shifting their allocation from interest - rate bonds to credit bonds. In March 2026, there will be a large - scale concentrated opening, releasing continuous credit bond allocation demand [5][11]. - The development of participating insurance is reshaping the asset allocation pattern of insurance funds. Insurance funds are expected to increase their net purchases of credit bonds and optimize their asset structure in 2026 [5][12]. - In March, bond market allocation should seize the structural opportunities, focus on the short - end credit products brought by the amortized bond fund's position - building window. The recommended priority is 1Y AAA medium - short - term notes > 1Y AAA commercial financial bonds > 1Y AAA inter - bank certificates of deposit [5][13]. 3. Summary According to the Directory 3.1. Amortized Bond Funds: Allocation Preference Migration and Yield Calculation - **Amortized Bond Fund Holdings: From Interest - rate to Credit**: As of the end of 2025, the scale of amortized bond funds was 150.8182 billion yuan. In Q4 2025, the market value of credit bond holdings increased by 56.74% quarter - on - quarter, and the proportion rose to 21.36%. Medium - term notes were the main increased bond type [23]. - **Allocation Preference Differentiation of Amortized Bond Funds with Different Fixed - Open Cycles**: Amortized bond funds with a cycle of less than 36 months prefer credit bonds, while those over 36 months prefer policy - financial bonds. Short - term and 63 - month funds are the main drivers of the shift from interest - rate to credit bonds [29]. - **Bond Type Allocation of Amortized Bond Funds with the Same Fixed - Open Cycle**: Some closed - cycle amortized bond funds show certain commonalities in bond type allocation, but there are also significant structural differentiations. Short - term and long - term funds have higher similarity in bond type allocation, while medium - and long - term funds have higher differentiation [35]. - **Amortized Bond Funds Build Positions after Entering the Closed - end Period**: Amortized bond funds usually build positions gradually after the closed - end period starts. In March 2026, there will be a large - scale maturity of amortized bond funds within 1 year and over 5 years (expected open scale over 9.6 billion yuan), and the new position - building demand is expected to drive the credit bond allocation demand [40]. - **The Remaining Term of Amortized Bond Fund Assets Should Match the Closed - end Period Requirement**: The remaining term of amortized bond fund assets is restricted by the length of the closed - end period. The actual position data at the end of Q4 2025 verifies the configuration logic of holding to maturity [46]. - **The Concentrated Opening of Amortized Bond Funds Compresses Credit Spreads**: The concentrated opening of amortized bond funds is beneficial to credit, pushing down the yields of corresponding - term credit products and narrowing credit spreads. In March 2026, the credit spreads of 1 - year and 5 - year credit bonds may be further compressed [50]. - **Comparison of 1 - year Amortized Bond Funds with Bonds of the Same Maturity**: Among the 12 sample 1 - year amortized bond funds, 11 have higher yields than national development bonds, 8 can outperform AAA - rated inter - bank certificates of deposit and AAA - rated commercial financial bonds, and 5 can outperform AAA - rated medium - short - term notes [55][57]. - **Estimation Logic and Validity Verification of Amortized Bond Fund Expected Yields**: Based on the heavy - position bond details disclosed in the quarterly reports, the expected yields of amortized bond funds can be reasonably predicted. The correlation coefficient between the estimated expected yields and the actual yields is 0.92, with good fitting results [60]. - **Future Yield Forecast of Amortized Bond Funds: Long - term Fixed - Open Cycle Products Have More Advantages**: In March 2026, the expected annualized yields (after fees) of amortized bond funds are concentrated in the range of 1.1% - 1.6%, and long - term fixed - open cycle funds such as 63 - month and 66 - month ones show obvious yield advantages [64]. - **Can Tier 2 Capital Bonds Continue to Be Allocated?**: From a historical perspective and considering the yield safety cushion, the allocation value of Tier 2 capital bonds has weakened. The "shrinking volume and rising price" trend in the market is a signal that the rising market is difficult to continue [69]. 3.2. Development of Participating Insurance: Reshaping the Insurance Asset Allocation Pattern - **Reducing the Duration Gap: The Development of Participating Insurance Benefits Medium - and Long - term Credit Bonds**: In early 2026, to reduce the duration gap, insurance funds showed an obvious term preference for credit bond allocation, and the trend of increasing medium - and long - term credit bonds is expected to continue in March [78]. - **New Accounting Standards: The VFA Model Drives Insurance to Increase Allocation of Tier 2 and Perpetual Bonds**: The VFA model can smooth the impact of asset price fluctuations on current profits. In January 2026, insurance institutions actively allocated Tier 2 and perpetual bonds, and this trend is expected to continue in March [85]. - **Clear Trend: The Increase in the Proportion of Participating Insurance Boosts Equity Allocation**: In 2026, the insurance industry's increase in equity asset allocation is a clear long - term trend, driven by the development of participating insurance. In March, the proportion of participating insurance is expected to further increase, and the demand for equity assets will continue to strengthen [90]. - **Outlook for March: The Deepening of "Fixed - Income +" Drives Insurance Funds to Increase Allocation of High - Coupon Assets**: In March 2026, insurance funds are expected to further increase their allocation of medium - and long - term credit bonds and Tier 2 and perpetual bonds, while reducing the allocation of national bonds and moderately increasing the allocation of local government bonds [93]. - **Variety Allocation Strategy: Seize the Amortized Bond Fund Position - Building Window and Focus on Short - end Credit Allocation**: In March 2026, the recommended priority for credit bond allocation is 1Y AAA medium - short - term notes > 1Y AAA commercial financial bonds > 1Y AAA inter - bank certificates of deposit [97].

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report - The overall disturbance to the liability side of the bond market in the fourth quarter is limited. Neither the equity market nor the "relocation" of deposits is sufficient to cause a trend disturbance to the bond market. The repair market in the fourth quarter is expected to continue. The yield of the active 10 - year Treasury bond (tax - free) is expected to decline to 1.65% - 1.7%, and the yield of the taxable bond is expected to decline to 1.7% - 1.75% [2][7][34]. 3. Summary by Related Catalogs For the Bond Market, Equity is a High - Odds Variable - Fixed - income and equity products have different risk preferences and corresponding customer risk levels. Even if the equity market rises significantly, the bond market's capital loss is not obvious. Residents participate in the fixed - income market mainly through bank deposits, wealth management products, and fund products [11]. - For wealth management products, after the net - value transformation, they prioritize performance stability and liquidity management. As of September this year, the scale of cash and deposits held by wealth management reached 9.4 trillion, accounting for 27.5%, a record high. The scale of equity assets held remains below 1 trillion, accounting for about 2%. The performance compliance rate is not high, with the overall lower - limit compliance rate at 65% as of September. Thus, fixed - income funds in wealth management are unlikely to flow to equity assets even when the equity market rises [12]. - Public funds are the main drivers of the stock - bond seesaw. In Q3 this year, hybrid and bond funds together increased their stock holdings by about 1.3 trillion to around 6 trillion, a 27.6% increase, and reduced bond holdings by about 2 trillion to around 22 trillion, an 8.2% decrease. "Fixed - income +" funds increased both stock and bond holdings by 0.97 trillion to over 3 trillion, a 45.2% increase. Since Q4, the equity market has been oscillating at a high level. Public funds are expected to prefer a balanced stock - bond allocation rather than significantly increasing risk asset positions [13]. Deposit "Relocation" is Relatively Mild and More Affects the Internal Pricing of the Bond Market - There are two main forms of deposit "relocation": to the equity market and to non - bank institutions due to low deposit interest rates. When deposits move to the equity market, it may drive up the equity market but will not cause the bond market to fall because margin deposits are still within the banking system [26]. - The decline in bank deposit interest rates has made the bank's liability side unstable. Before the central bank announced the resumption of Treasury bond trading, the 1Y AAA inter - bank certificate of deposit yield was above 1.65%. Even with some market speculation, the yield generally remains above 1.6% [29]. - The impact of deposit interest rate cuts on liabilities is relatively mild. Current small and medium - sized bank interest rate cuts are a follow - up to large - bank cuts. Since May this year, the prices of 10 - year Treasury bonds and LPR have not changed significantly, so a new round of deposit interest rate cuts is unlikely to start soon. The "relocation" of funds from deposits to wealth management is mild, and this capital movement is within fixed - income products, which is relatively beneficial to credit bonds [30][31].

1. Report Industry Investment Rating The provided content does not mention the report's industry investment rating. 2. Core Viewpoints of the Report - The bond market has a winning probability but lacks odds. It is recommended to allocate 10 - year Treasury bonds around a 1.65% yield on dips and to focus on the allocation opportunities of 3 - 5 - year credit bonds [2][8][46]. - The winning probability of the bond market depends on the trend factors in marginal changes, mainly the fundamentals and the supply - demand situation of funds. Currently, the fundamentals face downward pressure, and low prices may further develop, while factors such as fiscal deposit release, central bank net injection, and weak entity financing demand will lead to a decline in capital prices [8][16]. - The bond market lacks odds because it has fully priced in various positive factors, and the 10 - year Treasury bond yield has deviated significantly from the model results. Also, the scope and rhythm of monetary policy suggest that there is limited room for a significant decline in interest rates [8][39]. 3. Summary According to the Catalog Bond Market Has a Winning Probability - **Fundamentals**: Under the disturbance of trade frictions, the fundamentals face further downward pressure, and low prices may further develop, meaning the bond market lacks a basis for correction. In April, both manufacturing and non - manufacturing PMI declined month - on - month, and international crude oil prices dropped, putting direct pressure on prices [16][17]. - **Funds**: In the second quarter, the concentrated release of fiscal deposits, the central bank's resumption of net injection, and weak entity financing demand will jointly lead to a decline in capital prices. Fiscal deposit growth in February and March was the highest since February 2024, and government bond net financing in 1 - 4 months was much higher than in previous years. However, government bond net financing declined in April, and the central bank resumed net injection in mid - to - late April [27][28]. Bond Market Lacks Odds - **Pricing of Positive Factors**: The bond market has fully priced in various positive factors. The 10 - year Treasury bond yield has deviated significantly from the model results, indicating that the bond market has fully priced in factors such as the decline in capital prices and trade frictions in advance [39]. - **Monetary Policy**: Whether the tight pressure on narrow - sense liquidity is further transmitted to social financing is the key for the central bank to increase liquidity injection or cut the reserve requirement ratio. Under the assumption of an 8.2% annual social financing growth rate and M2 growth rate returning to the social financing growth rate, the central bank needs to cut the reserve requirement ratio by 50bp and inject 1.8 trillion yuan of base money. The central bank's future focus may be on the innovation of structural monetary policy tools [43].