Core Viewpoint - The bond market sentiment has improved recently, with the yield on 10-year government bonds stabilizing below 1.85%, and a recovery trend observed in long-term bonds, particularly a 6 basis points decline in the yield of 30-year government bonds from its recent high, reigniting expectations for a "cross-year market" [1] Group 1 - The recent strengthening of the RMB exchange rate has positively impacted the bond market, enhancing the attractiveness of RMB-denominated assets [1] - The monetary easing space has opened up, indicating potential for further recovery in the bond market [1] - Long-term bonds are expected to benefit from the narrowing of the term spread, making them more cost-effective [1]

1. Report Industry Investment Rating No relevant information provided. 2. Core View of the Report The report focuses on the cost - effectiveness and application prospects of the long - substitution strategy for the 30 - year Treasury bond futures (TL contract). By comparing the net - price trends, basis structures, and holding - return differences between the CTD bond of the TL contract and various spot targets, the report validates the feasibility of the long - substitution strategy. Back - testing shows that the strategy with the implied spread signal performs best, achieving annualized excess returns of 1.35%, 0.81%, and 1.05% for the 30 - year active bond, ChinaBond 30 - year Treasury bond index, and 30 - year Treasury bond ETF respectively. The TL contract can provide a more flexible allocation plan for investors [1][3][80]. 3. Summary According to the Table of Contents I. Current Cost - Effectiveness of the TL Contract as a Spot Long - Substitution (1) Net - Price Trend Correlation between the CTD Bond of the TL Contract and the 30 - Year Treasury Bond Active Bond/Index - The CTD bond of the TL contract is currently anchored to the 30 - year old bond. Its duration is shorter, yield is higher, and coupon rate is significantly higher than those of the 30 - year active bond and the ChinaBond 30 - year Treasury bond index. - In general, the net - price trends of the CTD bond of the TL contract and the 30 - year active bond/new index are similar. When the spread between new and old bonds narrows or widens significantly, differences may occur. In the case of a narrowing spread between new and old bonds and rising/volatile interest rates, the net - price trend of the CTD bond of the TL contract may be stronger than that of the 30 - year active bond/index; conversely, it may be weaker [2][9][11]. (2) Comparison of the Basis of the TL Contract and the Holding Returns of the 30 - Year Treasury Bond Active Bond/Index - The basis of the TL contract can be split into the holding return of the CTD bond and the net basis. The holding return accounts for a relatively high proportion in the basis pricing. - The coupon rate of the CTD bond of the TL contract is significantly higher than those of the 30 - year active bond and the ChinaBond 30 - year Treasury bond index. The net basis of the TL contract fluctuates greatly, increasing the probability of higher "coupon - like" returns compared to the 30 - year active bond/index [12][17][20]. (3) Rule Summary - The CTD bond of the current TL contract is anchored to the 30 - year old bond, with a shorter duration, higher yield, and higher coupon rate. - The TL contract is likely to have higher "coupon - like" returns than the 30 - year active bond/index. Assuming that the 30 - year Treasury bond interest rate does not rise close to 3% in the short term, the feature of the TL contract being anchored to the relatively high - coupon old bond is expected to continue [25][26]. II. Back - testing of the Long - Substitution Strategy (1) Comparison of Rolling Long - Position Returns between Futures and Spot - By comparing the continuous holding returns and risk performance of the TL Treasury bond futures contract, the 30 - year active bond, and the ChinaBond 30 - year Treasury bond index in the same back - testing period, the cost - effectiveness of the futures tool in a simple long - position allocation scenario can be intuitively judged. - Without considering capital costs, the annualized return of continuously holding the TL contract is only 0.66% lower than that of the 30 - year active bond. The difference between the annualized return of the ChinaBond 30 - year Treasury bond index and that of continuously holding the TL contract is small, indicating the feasibility of further back - testing the long - substitution strategy [29][31]. (2) Signal and Strategy Construction - Signal types: Three signals are constructed, including the historical quantile of the basis level, the "minimum" threshold for the basis convergence of futures converted from the spot holding return, and the superposition of the first two signals. - Strategy construction: Based on the above signals, a long - substitution strategy is back - tested on the TL contract. The futures closing date is set as the second - last trading day of the month before the futures contract delivery month. The spot targets include the 30 - year Treasury bond active bond, ChinaBond 30 - year Treasury bond index, and 30 - year Treasury bond ETF. The strategy also involves capital management and a specific back - testing time interval [32][34][37]. (3) Back - testing of the Futures Long - Substitution Strategy - For the 30 - year Treasury bond active bond, the implied spread signal performs best. The annualized return of signal 1 and the superposition signal is 11.74%, 1.35% higher than holding the 30 - year Treasury bond active bond, with better risk - return ratios. - For the ChinaBond 30 - year Treasury bond index, the implied spread signal 1 and the superposition signal also perform best, with an annualized return of 12.45%, 0.81% higher than holding the index, and better risk - control and risk - return indicators. - For the 30 - year Treasury bond ETF, using the implied spread signal, signal 1 and the superposition signal achieve an annualized return of 12.15%, 1.05% higher than holding the ETF [37][54][73]. (4) Conclusion - The TL contract can be regarded as a substitute for the 30 - year old Treasury bond. The long - substitution strategy with the implied spread as the core signal can effectively optimize asset - allocation efficiency, providing a differentiated allocation plan for investors, especially suitable for index - based assets such as the ChinaBond 30 - year Treasury bond index and 30 - year Treasury bond ETF [80].

Group 1 - The article discusses the recent significant decline in bond prices, particularly highlighting the 30-year government bond yield rising from around 2.06% to over 2.11% in a single day [1][11] - The article attributes the bond market's volatility to new public fund regulations regarding redemption fees and rumors about tax exemptions, which have created a sensitive environment for bonds in a low-interest-rate context [12][11] - It emphasizes the importance of strategic asset allocation, suggesting that investors should adopt a diversified approach rather than focusing solely on the performance of individual assets like bonds [17][16] Group 2 - The article notes that A-shares have seen a decrease in trading volume, dropping from 3 trillion to 2 trillion, leading to a "pants-snatching" situation where liquidity is concentrated in a few hot sectors [21][22] - It highlights the performance of specific stocks, particularly in the AI and battery sectors, which have shown significant trading activity and volatility [25] - The article mentions the strong performance of Alibaba in the Hong Kong market, with substantial net buying from mainland investors, indicating a positive sentiment towards the stock [26][27]

Core Viewpoint - The bond market experienced a rapid adjustment last week, alleviating concerns about prolonged high yields, but short-term volatility remains inevitable [1] Group 1: Market Performance - The yield on the 10-year government bond rose to 2.20%, an increase of 8 basis points (BP), while the 30-year bond yield rose to 2.38%, up 4 BP [2] - The yields had previously reached historical lows of 2.08% and 2.29% for the 10-year and 30-year bonds, respectively, marking the lowest levels since 2003 and 2005 [2] - The average yield of medium to long-term pure bond funds was -0.0868%, with a median of -0.0867%, indicating a general decline in bond prices [4] Group 2: Fund Management Strategies - Fund managers have indicated a high duration allocation, reflecting a conservative strategy amidst the bond market's high yields [2] - Recommendations suggest that proprietary trading desks should gradually enter the market at higher levels, while asset management institutions should align their duration closely with market peers [3] - The analysis suggests maintaining existing positions in the bond market, as the adjustment space for long bond yields is expected to be limited [5] Group 3: Investor Sentiment - The bond market's cautious sentiment is evident, with nearly 80% of medium to long-term bond funds reporting negative weekly returns [4] - The overall investment environment is characterized by a strong aversion to excessive speculation in interest rate bonds, emphasizing the need for disciplined investment practices [5]

Report Investment Rating - No information provided on the industry investment rating Core View - Due to the escalation of tariff games and heightened expectations of monetary easing, as well as the influence of risk aversion, the bond market has risen significantly. Short - term risk aversion still favors the bond market, and the Treasury bond futures market may be strong. However, as bond yields approach the previous low of the year and the downward trend of capital interest rates has stalled, it may restrict the decline of long - term bond yields. Attention should be paid to the central bank's capital injection and subsequent pro - consumption and loose fiscal policies, which may bring fluctuations to the bond market [1][6][13] Summary by Directory 1. Tariff Game Escalation, Rising Expectations of Monetary Easing - The US announced a "reciprocal tariff" plan, increasing tariffs on China by 34%, with cumulative tariffs potentially exceeding 60%. China imposed a 34% tariff on all US imports in response. The tariff game and trade friction may enter a deeper stage [1] - In the previous round of trade frictions in 2018, China's exports to the US declined rapidly. This time, with higher tariff increases, short - term net exports are likely to fall. In Q1 2025, the contribution rate of net exports to China's GDP reached 45.8%. Under the pressure of external demand, the market's expectation of looser monetary policy has increased. Short - term reserve requirement ratio cuts may be relatively mature, while interest rate cuts still need fundamental signals [2] 2. Risk Aversion Drives the Stock - Bond Seesaw to Favor the Bond Market - The current trade game has entered a deeper stage, and there is great uncertainty about the actual implementation of tariffs, negotiation conditions, and time, which may suppress risk appetite in the short term. The stock market declined significantly today, which is favorable for the bond market from the perspective of the stock - bond seesaw. In the medium term, domestic policies are sufficient, and the domestic economy has resilience, but the short - term decline in global risk appetite will continue to support the bond market [6] 3. Capital Interest Rates Have Not Declined Further, Need to Pay Attention to the Impact of Subsequent Growth - Stabilizing Policies on the Bond Market Rhythm - Since early April, capital interest rates and certificate of deposit rates have declined, which has boosted the bond market. However, the decline of capital interest rates has stalled. On April 7, the central bank conducted a net withdrawal of 301.7 billion yuan in the open market, and the 7 - day capital interest rate of depository institutions was around 1.75%, and the non - bank capital interest rate was around 1.8%, not lower than before the Tomb - Sweeping Festival [7] - As of April 7, the yield of the 10 - year Treasury bond has dropped to around 1.64%, only 4BP away from the January low. Currently, the decline in bond yields is mainly due to risk aversion and easing expectations. Considering the short - term pressure of RMB depreciation, it is uncertain whether capital interest rates can decline further. As bond yields approach the previous low, a 35 - 40BP interest rate cut is gradually being priced in, but the policy rhythm is still uncertain. Fiscal policies are likely to be strengthened in Q2, and subsequent capital interest rate trends and growth - stabilizing policies will determine the bond market rhythm [8] 4. Outlook for Treasury Bond Futures - Affected by expectations of monetary easing, risk aversion, and the stock - bond seesaw effect, Treasury bond futures opened higher and closed up today. Short - term risk aversion still favors the bond market, but the lack of further decline in capital interest rates may restrict the decline of long - term bond yields. Attention should be paid to the central bank's capital injection and bank - to - bank capital. Subsequent pro - consumption and loose fiscal policies may bring fluctuations to the bond market. It is recommended that investors hold long positions in the short term and stop profits in a timely manner if capital interest rates rise marginally [13]