1. Report Industry Investment Rating No information provided regarding the industry investment rating. 2. Core Viewpoints of the Report - Recent bond fund durations have increased. On November 7, the median duration (including leverage) of medium - and long - term bond funds rose by 0.14 years compared to November 3 [5][10]. - From a seasonal perspective, historical data shows that interest rates tend to decline from November to December. Current conditions are favorable for going long on the bond market, but the odds may be limited [5][10]. - Investors should pay attention to the issuance scale of the 30 - year ordinary treasury bonds to be issued in November and December. If the scale is around 300 billion yuan, the bond may not strengthen significantly; if it is around 700 billion yuan, it may strengthen [5][11]. 3. Summary by Relevant Catalog 3.1 This Week's Bond Market Review - Bond fund durations have increased. Funds have increased their purchases of credit bonds, bought 30 - year treasury bonds, sold 10 - year treasury bonds, and increased their allocations of 10 - year policy financial bonds and 20 - and 30 - year local government bonds. Big banks continue to buy short - term bonds, and securities firms have slightly net - sold [5][10]. - Conditions are favorable for going long on the bond market, but the odds may be limited. Attention should be paid to the issuance scale of 30 - year ordinary treasury bonds [5][10][11]. 3.2 Bond Yield Curve Tracking 3.2.1 Key Maturity Interest Rates and Spread Changes - As of November 7, compared with November 3, the 1 - year treasury bond yield rose 1.53bp to 1.40%, the 10 - year rose 1.98bp to 1.81%, and the 30 - year rose 2.05bp to 2.16%. The 30 - year - 10 - year treasury bond spread rose 0.07bp to 34.39bp, and the 10 - year CDB - 10 - year treasury bond spread rose 1.11bp to 13.47bp [12]. 3.2.2 Treasury Bond Maturity Spread Changes - As of November 7, compared with November 3, the 3 - year - 1 - year treasury bond spread rose 0.85bp to 4.04bp, the 5 - year - 3 - year spread fell 1.33bp to 14.24bp, the 7 - year - 5 - year spread rose 2.14bp to 12.65bp, the 10 - year - 7 - year spread fell 1.21bp to 10.04bp, the 20 - year - 10 - year spread rose 0.48bp to 33.42bp, and the 30 - year - 20 - year spread fell 0.41bp to 0.97bp [14]. 3.3 Bond Market Leverage and Funding Situation 3.3.1 Inter - bank Pledged Repurchase Balance - As of November 7, compared with November 3, the inter - bank pledged repurchase balance decreased by 0.48 trillion yuan to 11.61 trillion yuan [17]. 3.3.2 Inter - bank Bond Market Leverage Ratio Changes - As of November 7, compared with November 3, the inter - bank bond market leverage ratio decreased by 0.34 percentage points to 106.99% [18]. 3.3.3 Pledged Repurchase Turnover - From November 3 to November 7, the average pledged repurchase turnover was 7.97 trillion yuan, and the average overnight turnover was about 7.14 trillion yuan, with an average overnight turnover ratio of 89.59% [22][23]. 3.3.4 Inter - bank Funding Operation - From November 3 to November 7, bank fund lending and single - day fund supply first increased and then decreased. As of November 7, the net fund lending of large banks and policy banks was 4.44 trillion yuan, and the single - day fund supply was 3.90 trillion yuan. Regarding funding rates, DR001 was 1.3321%, DR007 was 1.4130%, R001 was 1.3916%, and R007 was 1.4677% [24][27]. 3.4 Medium - and Long - Term Bond Fund Durations 3.4.1 Median Bond Fund Duration - As of November 7, the median duration of medium - and long - term bond funds was 2.72 years (de - leveraged), up 0.05 years from November 3; the median duration (including leverage) was 2.87 years, up 0.14 years [39]. 3.4.2 Median Interest - Rate Bond Fund Duration - As of November 7, the median duration of interest - rate bond funds (including leverage) was 3.83 years, up 0.10 years from November 3; the median duration (de - leveraged) was 3.34 years, up 0.04 years. The median duration of credit bond funds (including leverage) was 2.62 years, up 0.10 years, and (de - leveraged) was 2.53 years, up 0.07 years [43]. 3.5 Bond Lending Balance Changes - As of November 6, compared with November 3, the borrowing volume of 10 - year CDB bonds fluctuated [46].

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 core viewpoint is that the 30-year government bond yield may experience a 20 basis point adjustment in Q4 due to various factors including a rise in yield from 1.84% to 2.2% and a significant reduction in the issuance of long-term bonds [1] - The risk appetite is expected to decline gradually, with market sentiment shifting from bullish to a more cautious stance, potentially leading to a capital flow back into the bond market [1] - The insurance premium growth is anticipated to improve slowly as the public gradually accepts a 2% deposit rate, which may lead to increased demand for 30-year bonds towards the end of the year [1] Group 2 - As of October 17, 2025, the 5-10 year government bond ETF index has risen by 0.06%, with a cumulative increase of 3.42% over the past year [2] - The trading volume for the 5-10 year government bond ETF was active, with a turnover of 45.05% and a transaction value of 6.95 billion yuan [2] - The latest scale of the 5-10 year government bond ETF reached 1.542 billion yuan, marking a six-month high [3] Group 3 - The 5-10 year government bond ETF has shown a net value increase of 21.93% over the past five years, ranking in the top 17.32% among 179 index bond funds [3] - The maximum drawdown for the 5-10 year government bond ETF in the last six months was 1.09%, with a relative benchmark drawdown of 0.40% [4] - The management fee for the 5-10 year government bond ETF is 0.15%, and the custody fee is 0.05% [5] Group 4 - The tracking error for the 5-10 year government bond ETF over the past month was 0.023%, indicating a close alignment with the underlying index [6] - The index reflects the performance of actively traded government bonds with maturities of 5, 7, and 10 years, calculated using a non-market capitalization weighted method [6]

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]

Investment Rating - The industry investment rating is "Positive" (maintained) [1] Core Viewpoints - The trend of "wealthization" of deposits is accelerating, with a notable shift from traditional savings to non-bank deposits, indicating a potential for increased investment in low-risk financial products [4][6] - The credit growth is slowing down, with large banks focusing on supporting credit growth through bill discounting and bond investments, while smaller banks are experiencing a contraction in deposits [5][12] - The average cost of liabilities for listed banks is expected to decline, enhancing the banks' asset allocation capabilities and potentially leading to a recovery in self-operated investment demand [6][16] Summary by Sections Deposit Trends - In August, large banks saw a decrease of 169.5 billion yuan in demand deposits and a modest increase of 159.7 billion yuan in time deposits, both weaker than seasonal trends [4][11] - Non-bank deposits continued to grow, with an increase of 591.9 billion yuan in August, reflecting a shift in investor preference towards higher-yielding short-term financial products [4][12] Credit and Investment Dynamics - The credit rhythm remains slow, with large banks experiencing a reduction in credit attributes and an increase in funding attributes, supported by a 19.5% year-on-year growth in bond investments [5][16] - Smaller banks are facing challenges in credit growth due to weak demand and a strategic shift to reduce low-priced loans and high-risk exposures [5][13] Future Outlook - The average cost of liabilities for listed banks is projected to decrease to below 1.6% in the second half of 2025, which may alleviate the pressure on banks' asset allocation [6][16] - The ongoing "wealthization" of deposits is expected to lead to a decline in the stability of bank liabilities, necessitating a more diverse supply of medium- to long-term base currency [6][19] Investment Recommendations - The trend of asset "de-involution" and the wealthization of deposits are likely to benefit comprehensive service banks, particularly state-owned large banks and resource-endowed banks [7][16] - The banking sector continues to attract stable capital due to its strong dividend attributes, with a focus on low-weight stocks benefiting from this trend [7][16]

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]

1. Report Industry Investment Rating - The report is bullish on the bond market in the short - term, expecting the 10Y Treasury yield to return to around 1.65% in the next six months and the 5Y national and regional bank secondary capital bonds to reach below 1.9% [1][2] 2. Core View of the Report - The bond market may gradually decouple from the stock market as the long - term bond holdings of securities firms' proprietary trading and bond funds decline significantly. The recent bond market correction is due to the systematic active reduction of duration by bond funds and securities firms' proprietary trading, not related to the economic fundamentals [1] - Since 2010, only stock bull markets driven by fundamentals have led to bond bear markets, while those driven by funds have not. The current stock market rally may be driven by funds and has a weak relationship with fundamentals [1] - The diversion of funds from the bond market by the stock market is limited. The growth of the bond investment of bank proprietary trading is significant, and the scale growth of wealth management products is less affected by the stock market [1] - There are multiple reasons to be bullish on the bond market in the short - term, including continuous central bank easing, increasing economic downward pressure, possible restart of central bank's Treasury bond purchases, continuous decline in bank liability costs, and the passing of the peak of government bond net issuance [1][2] 3. Summary by Relevant Catalogs 3.1 Bond - Stock Relationship - From July 1 to August 22, 2025, in the secondary trading of inter - bank market interest - rate bonds, securities firms' proprietary trading net - sold 479 billion yuan, including 114.6 billion yuan of bonds with a remaining maturity of over 20 years; public funds (excluding money - market funds) net - sold 436 billion yuan of interest - rate bonds, including 60.5 billion yuan of those with a maturity of over 20 years. As the long - term bonds held by bond funds and securities firms' proprietary trading are transferred to insurance funds and other allocation players, the impact of the stock market on the bond market will weaken [1] - Since 2010, there have been three major stock market bull markets: the 14Q4 - 15Q1 bull market was driven by funds, resulting in a bull market for both stocks and bonds; the 2017 and 2020 - 2021 bull markets were driven by economic recovery, leading to a bear market in bonds. The 2024 "924" stock market rally led to a rapid adjustment in the bond market, but the bond market stabilized quickly after the stock market peaked on October 8 [1] 3.2 Diversion of Funds - As of the end of July 2025, the bond - holding scale of bank proprietary trading reached 99 trillion yuan, accounting for 52% of the total scale of China's bond market. In the first seven months of 2025, the net issuance of Chinese bonds totaled 14.3 trillion yuan, and the bond investment balance of the banking industry increased by 9.6 trillion yuan, accounting for 67.5% [1] - The diversion of funds from the bond market by the stock market is mainly reflected in the possible moderate increase in the stock investment ratio and decrease in the bond investment ratio of flexible allocation funds, annuities, and insurance funds during a stock bull market, but the actual diversion scale is limited. The scale growth of wealth management products is due to the substitution of deposits and is less affected by the stock market [1] 3.3 Reasons for Bullish on the Bond Market - Central bank's continuous easing: Since 25Q2, the DR001 and DR007 interest rates have dropped significantly, indicating a shift from "de - facto interest rate hike" in 25Q1 to "de - facto interest rate cut". It is expected that the capital interest rate will remain low and have low volatility in the next six months [1] - Increasing economic downward pressure: Consumption subsidies may overdraw the demand for household appliances, the consumption growth rate started to decline in July, the real estate market remains sluggish, and the investment growth rate has dropped significantly, so the economic downward pressure may increase significantly in the second half of the year [1] - Possible restart of central bank's Treasury bond purchases: Considering the recent significant rebound in Treasury bond yields, indicating an oversupply of Treasury bonds, the central bank may restart Treasury bond purchases when the 10Y Treasury yield reaches above 1.8% [1][2] - Decrease in bank liability costs: As the deposit interest rates have been significantly reduced in the past few years, the bank liability cost rate is expected to decline quarter - by - quarter. The 10Y Treasury bonds have certain allocation value for most bank proprietary trading, and the weak credit demand may prompt banks to increase bond investment [1][2] - Passing of the peak of government bond net issuance: As of August 22, the net issuance of government bonds since the beginning of the year has reached 10.4 trillion yuan, accounting for 75% of the annual plan, and the net issuance scale in Q4 is expected to be small [2]

Core Viewpoint - The article discusses the current market trends, highlighting the strong performance of the stock market approaching the 3500-point mark, alongside a balanced and loose funding environment, with slight increases in long-term bond yields [1]. Group 1: Market Performance - The Shanghai Composite Index has reached its highest closing level since September 2022, just a step away from the 3500-point mark [4]. - The stock market is exhibiting strong performance, with a notable "stock-bond seesaw" effect observed as bond yields fluctuate [3]. Group 2: Funding Environment - The central bank conducted a 690 billion yuan reverse repurchase operation, with 1310 billion yuan of reverse repos maturing, resulting in a net withdrawal of 620 billion yuan [1]. - The funding rates remain stable, with DR001 around 1.31% and DR007 around 1.46% [1]. Group 3: Interest Rates and Transactions - The weighted average rates for various repo codes show slight increases, with R001 at 1.37% and R007 at 1.51%, indicating a minor upward trend in interest rates [2]. - The trading volume for R007 increased by 1537.10 million yuan, reflecting active market participation [2].

Core Viewpoint - The market is influenced by various unpredictable stories, making it difficult to forecast future trends based on past events or factors [1]. Group 1: Market Conditions - The central bank conducted a 1,065 billion yuan 7-day reverse repurchase operation, with 3,315 billion yuan of reverse repos maturing today, resulting in a net withdrawal of 2,250 billion yuan [2]. - The funding environment remains balanced and loose, with the DR001 rate around 1.31% and the DR007 rate around 1.47% [2]. - The bond market showed mixed movements, with the 10-year government bond yield fluctuating around 1.64% [4]. Group 2: Economic Events - Trump signed 12 trade letters and announced that countries aligned with anti-American policies in BRICS would face an additional 10% tariff [4]. - The bond market experienced low trading activity, with the total number of transactions for 10-year government bonds being less than 1,200 and the price fluctuations being minimal [4]. - Despite the mixed signals from Trump regarding trade policies, the global market seems to be trading based on the expectation that he may backtrack on his threats [4].