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].