Report Industry Investment Rating Not provided in the document. Report Core Viewpoints - From January to July, the year-on-year growth of the national general public budget revenue was only 0.1%, and the tax revenue decreased by 0.3% year-on-year, reflecting weak economic recovery momentum. The fiscal expenditure increased by 3.4% year-on-year, with a high increase of 9.8% in social security and employment expenditure, indicating increased policy support. The LPR has remained unchanged for four consecutive months, and with the Fed signaling a possible September rate cut, domestic capital interest rates are expected to remain low, and the capital market may continue to be loose [2][4][73]. - This week's meso - level data shows that consumption and transportation continue to recover, but the real - estate chain remains sluggish, and industrial product prices are differentiated. The bond market adjustment is mainly due to the "stock - bond seesaw" effect and institutional behavior disturbances. As ultra - long bonds held by bond funds and securities firms' proprietary trading are transferred to insurance funds and other allocation players, the subsequent impact of the stock market on the bond market may be significantly weakened, and the bond market is expected to gradually return to fundamental and capital - market pricing [2][11][75]. - Short - term bond market is suppressed by sentiment, but continuous central bank easing and banks' proprietary trading allocation needs provide support. The peak of net government bond issuance this year has passed. After September, the net issuance of government bonds may not exceed 25% of the annual plan, and interest - rate bonds may see a recovery window. The report maintains that the yield of the 10Y Treasury bond will be between 1.6% - 1.8% in the second half of the year. Currently, the 10Y Treasury bond yield is close to 1.8%, with high cost - effectiveness. In the next six months, the 10Y Treasury bond yield is expected to return to around 1.65%, and the yield of the 5Y national and regional secondary capital bonds will fall below 1.9%. Investors should cherish 5Y capital bonds and 30Y Treasury bonds with yields above 2% [4][11][75]. Summary by Directory 1. Macroeconomic News - From January to July 2025, the national general public budget revenue was 13.6 trillion yuan, a year - on - year increase of 0.1%. Among them, tax revenue was 11.1 trillion yuan, a year - on - year decrease of 0.3%, and non - tax revenue was 2.5 trillion yuan, a year - on - year increase of 2%. The national general public budget expenditure was 16.1 trillion yuan, a year - on - year increase of 3.4%. Social security and employment expenditure increased by 9.8% year - on - year, and debt interest payment expenditure increased by 6.4% year - on - year [4][12]. - On August 20, the 1 - year LPR was 3.0%, and the 5 - year and above LPR was 3.5%, remaining unchanged for four consecutive months [4][15]. - On the evening of the 22nd, Fed Chairman Powell signaled a possible September rate cut at the Jackson Hole Global Central Bank Annual Meeting. Market expectations for a September rate cut soared to over 90% [4][18]. 2. Meso - level High - frequency Data 2.1 Consumption: Continuous Recovery - As of August 17, the daily average retail volume of passenger cars was 5.9 million, a year - on - year increase of 8.2%, and the daily average wholesale volume was 6.3 million, a year - on - year increase of 22.5%. As of August 22, the total box office revenue of national movies in the past 7 days was 123,676.2 million yuan, a year - on - year increase of 14.8% [19]. - As of August 15, the total retail volume of three major household appliances was 1.652 million, a year - on - year increase of 10.6%, and the total retail sales were 4.04 billion yuan, a year - on - year increase of 17.5% [21]. 2.2 Transportation: Active Logistics - As of August 17, the container throughput of ports was 6.753 million TEUs, a year - on - year increase of 8.7%. As of August 22, the average subway passenger volume in first - tier cities in the past 7 days was 4,061.8 million, a year - on - year increase of 4.1% [25]. - As of August 17, the railway freight volume was 7,966.0 million tons, a year - on - year increase of 4.2%, and the highway truck traffic volume was 5,493.0 million vehicles, a year - on - year increase of 4.6% [28]. 2.3 Industrial Operating Rates: Strong Upstream, Weak Downstream - As of August 20, the blast furnace operating rate of major steel enterprises was 77.5%, a year - on - year increase of 2.8 percentage points. As of August 21, the average asphalt operating rate was 25.0%, a year - on - year increase of 3.0 percentage points [33]. - As of August 21, the soda ash operating rate was 88.8%, a year - on - year increase of 6.5 percentage points, and the PVC operating rate was 75.6%, a year - on - year increase of 1.9 percentage points. As of August 22, the average PX operating rate was 85.2%, and the average PTA operating rate was 76.4% [36]. 2.4 Real Estate: Continued Downturn - As of August 22, the total commercial housing transaction area in 30 large - and medium - sized cities in the past 7 days was 1.541 million square meters, a year - on - year decrease of 15.1%. As of August 15, the second - hand housing transaction area in 9 sample cities was 1.433 million square meters, a year - on - year increase of 5.5% [39][42]. 2.5 Prices: Differentiated Industrial Products, Pressured Agricultural Products - As of August 22, the average wholesale price of pork was 20.1 yuan/kg, a year - on - year decrease of 27.3% and a 2.9% decrease from four weeks ago. The average wholesale price of vegetables was 4.8 yuan/kg, a year - on - year decrease of 20.9% and a 9.8% increase from four weeks ago. The average wholesale price of 6 key fruits was 6.9 yuan/kg, a year - on - year decrease of 6.3% and a 3.0% decrease from four weeks ago [43]. - As of August 22, the average price of thermal coal at northern ports was 698.0 yuan/ton, a year - on - year decrease of 15.9% and an 8.9% increase from four weeks ago. The average spot price of WTI crude oil was 62.8 US dollars/barrel, a year - on - year decrease of 15.1% and a 4.4% decrease from four weeks ago. The average spot price of rebar was 3,248.6 yuan/ton, a year - on - year increase of 3.6% and a 1.9% decrease from four weeks ago [47]. 3. Bond and Foreign Exchange Markets: Bond Market Adjustment - On August 22, overnight Shibor was 1.42%, down 1.80BP from August 18. R001, R007, DR001, DR007, IBO001, and IBO007 all showed different degrees of decline or increase compared to previous periods [54]. - On August 22, the yields of 1 - year, 5 - year, 10 - year, and 30 - year Treasury bonds were 1.38%, 1.63%, 1.78%, and 2.08% respectively, up 1.3BP, 3.8BP, 3.6BP, and 3.0BP respectively from August 15. The yields of 1 - year, 5 - year, 10 - year, and 30 - year China Development Bank bonds were 1.56%, 1.77%, 1.88%, and 2.18% respectively, up 3.7BP, 3.9BP, 2.1BP, and 3.0BP respectively from August 15 [59]. - On August 22, the yields of 1 - year, 5 - year, and 10 - year local government bonds were 1.43%, 1.74%, and 1.95% respectively, up 5.0BP, 5.0BP, and 10.6BP respectively from August 15. The yields of AAA 1 - month, 1 - year, AA+ 1 - month, and 1 - year inter - bank certificates of deposit were 1.49%, 1.67%, 1.50%, and 1.69% respectively, up 1.9BP, 2.5BP, 0.9BP, and 1.5BP respectively from August 15 [61]. - As of August 22, the ten - year Treasury bond yields of the US, Japan, the UK, and Germany were 4.3%, 1.6%, 4.7%, and 2.8% respectively, down 7BP, up 6BP, up 1BP, and up 1BP respectively from August 15 [64]. - On August 22, the central parity rate and spot exchange rate of the US dollar against the RMB were 7.13 and 7.18 respectively, down 50 and 18 pips respectively from August 15 [67]. 4. Institutional Behavior - Since the beginning of 2025, the duration of medium - and long - term pure bond funds for interest - rate bonds has shown a trend of first decreasing, then increasing, and then decreasing. On August 22, the estimated average duration was about 5.1 years, a decrease of about 0.09 years compared to last week [70]. - Since the beginning of 2025, the duration of medium - and long - term pure bond funds for credit bonds has shown a volatile trend. On August 22, the estimated median and average duration were about 2.9 years, an increase of about 0.11 years compared to last week [72]. 5. Investment Recommendations - After securities firms' proprietary trading and bond funds reduce their durations, the bond market may experience a good market. The short - term bond market is suppressed by sentiment, but central bank easing and banks' proprietary trading allocation needs provide support. The peak of net government bond issuance this year has passed. After September, the net issuance of government bonds may not exceed 25% of the annual plan, and interest - rate bonds may see a recovery window. The report maintains that the yield of the 10Y Treasury bond will be between 1.6% - 1.8% in the second half of the year. Currently, the 10Y Treasury bond yield is close to 1.8%, with high cost - effectiveness. In the next six months, the 10Y Treasury bond yield is expected to return to around 1.65%, and the yield of the 5Y national and regional secondary capital bonds will fall below 1.9%. Investors should cherish 5Y capital bonds and 30Y Treasury bonds with yields above 2% [4][11][75].

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]