1. Report Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - Current oil price and price changes have limited impact on the bond market, and the bank - led allocation market remains the main trend, which may be more obvious after the end of the quarter [6][23] - The current price increase does not drive the improvement of corporate profits, and monetary policy has difficulty in responding to exogenous price changes, so the overall impact on interest rates is limited [6][23] - The lack of financing demand and high savings willingness lead to an increase in deposits and a decline in loan growth. Banks are still in an asset - shortage environment, which will lead to loose funds and restrict the upper limit of interest rates [6][23] - Near the end of the quarter, the pressure of indicators and capital fluctuations may restrict the bank's bond - allocation rhythm and cause small market disturbances. But after the end of the quarter, the seasonal slowdown of credit will widen the asset gap, and the bank's allocation demand may be stronger, driving interest rates further down [6][23] - Leveraging and riding are stable strategies to increase returns, and the capital gains from extending duration may be more significant after the end of the quarter [6][23] 3. Summary by Related Catalogs 3.1 Bond Market Performance This Week - The bond market fluctuated this week, with long - term bonds slightly adjusted and short - term bonds declining significantly. The yields of 10 - year and 30 - year treasury bonds rose by 0.6bps and 0.9bps to 1.78% and 2.28% respectively, while the yield of 1 - year treasury bonds fell by 3.1bps to 1.29%. The yields of 3 - year and 5 - year secondary perpetual bonds fell by 2.3bps and 0.2bps to 1.86% and 2.08% respectively, and the yield of 1 - year AAA certificates of deposit fell by 2.5bps to 1.55% [1][9] 3.2 Impact of the US - Iran Conflict on Oil Prices - The current focus of the global capital market is the US - Iran conflict. As the conflict intensifies, oil prices have soared. The Brent crude oil price has risen from $71.1 per barrel last weekend to $94.4 per barrel, with a weekly increase of more than 30%, the highest weekly increase this century. After the Russia - Ukraine war, Brent crude oil once rose from $99.6 per barrel on February 25, 2022, to a maximum of $137.7 per barrel on March 8, 2022, with a cumulative increase of 38%, but then gradually declined. Due to the lack of signs of easing in the current US - Iran conflict, the market is worried that the long - term conflict may keep energy prices at a high level [1][9] 3.3 Impact of Oil Price Increase on the Domestic Bond Market - In the short term, the US - Iran war has led to a sharp rise in oil prices, causing a general adjustment in the global capital market, which reduces risk appetite and drives funds into the bond market, helping the bond market recover in the short term. But in the medium term, the market is more worried that the rise in oil prices will push up inflation from the cost side, affect monetary policy, and thus create adjustment pressure on the bond market [2][10] - Considering the improvement trend of CPI and PPI in the past few months, the market is more worried about the pressure of rising prices on the bond market. Especially for PPI, the year - on - year PPI in January was - 1.4%. If the subsequent PPI month - on - month is 0, the year - on - year PPI will turn positive in May. Considering factors such as the recent rise in oil prices, the month - on - month is more likely to be above 0, and PPI may turn positive in April or May [2][10] 3.4 Analysis of the Impact of Price Increase on Interest Rates - The K - shaped price increase may mean that it has no obvious pressure on interest rates. Currently, price increases are concentrated in a few industries such as non - ferrous metals, and the PPI of other industries has not risen. The price increases of non - ferrous metals and oil are more input - type, which mainly raises the costs of domestic enterprises. Therefore, during the recovery of PPI, corporate profits have not improved, and there has been no corresponding increase in financing demand [3][13] - For this input - type price change, the domestic monetary policy's regulatory ability is relatively limited. The changes in non - ferrous metals and oil prices are more exogenous, so the monetary policy may choose a response similar to the increase in pork prices in 2019 and will not tighten because of this [3][13] - Even in the 1970s, when the oil crisis significantly pushed up inflation, its impact on interest rates was not as significant as that on prices. During the two oil crises in the 1970s, the international crude oil price soared, and the Brent crude oil price rose from $1.2 per barrel at the end of 1970 to $40.5 per barrel at the end of 1979. Affected by this, the inflation of economies such as the US and Japan increased significantly. However, due to the limited improvement in corporate profitability and the relatively restrained response of monetary policy, the increase in interest rates was significantly lower than that in inflation [4][18] 3.5 Importance of Asset Gap in the Current Bond Market - The most important factor in the current bond market is the asset gap. This year, the overall financing demand is weak, and residents face increased uncertainty during the economic transformation, with relatively low risk appetite. This leads to a high increase in deposits and a decline in loan growth. For banks, this means a continuous widening of the asset gap [5][21] - Banks need to increase bond allocation or inter - bank capital lending to match. This will form a stable allocation force in the bond market, restricting the upward space of bond interest rates, and create a continuous loose capital pattern, bringing stable leveraged returns [5][21] - Near the end of the quarter, the bank's bond - allocation rhythm may slow down slightly under the influence of indicator pressure, and there may be small fluctuations in funds. But after mid - March, the bank's bond - allocation demand is expected to recover, and combined with the traditional credit off - season in April, the bond - allocation demand may be stronger, and funds are expected to be looser after the quarter [5][21]

Report Industry Investment Rating - Not provided in the content Core Viewpoints - The report recommends holding bonds during the Spring Festival. The current fundamental situation provides background support for the bond market, with continued loose liquidity, potential further decline in short - term interest rates, limited post - festival bond supply pressure, stronger market allocation power, and limited impact of the stock market on the bond market due to the low duration of trading institutions. If trading institutions increase leverage, it will further boost the bond market. The overall market trend is in a gradual recovery, and the dumbbell strategy is relatively more advantageous [1][5][21] Summary by Related Content 1. Current Bond Market Performance - This week, the bond market continued to recover, with long - term bonds performing more prominently. Interest rates across all tenors declined. The yields of 10 - year and 30 - year treasury bonds decreased by 0.1bps and 3.8bps respectively to 1.81% and 2.25%. The yields of 3 - year and 5 - year secondary capital bonds dropped by 1.6bps and 1.8bps respectively, and the 1 - year AAA certificate of deposit (CD) rate broke through 1.6%, falling 1bps to 1.59%. The dumbbell strategy recommended earlier achieved better returns [1][9] 2. Reasons for Recommending Holding Bonds During the Spring Festival 2.1 Loose liquidity will continue - The current liquidity remains stably loose, which is beneficial for the leverage strategy. Overnight funds are around 1.4%, and the 7 - day repurchase rate is around 1.4% - 1.5%. This is not due to increased central bank capital injection but rather weak financing demand and capital supplementation from other channels such as fiscal deposits. After the Spring Festival, funds tend to be even looser [1][10] - The loose funds will protect the bond market and may drive interest rates to decline from short - term to long - term. As funds remain loose, the CD rate may further decline to 1.5% - 1.55%. The current steep curve means that a decline in short - term interest rates will enhance the cost - effectiveness of long - term bonds and drive down long - term interest rates. The spread between the 10 - year treasury bond and the 1 - year CD is over 20bps, the highest since the second half of 2023 [2][13] 2.2 Limited post - festival market supply pressure and high bank allocation demand - In the first five weeks of this year, government bond net financing was about 2 trillion. If the first - quarter net financing is the same as last year at about 4.1 trillion, the net financing in the five weeks after the festival until the end of the quarter will also be about 2 trillion, with a weekly average similar to that before the festival. Since credit is more concentrated in January, post - festival bank and other institutional allocation needs are stronger [3][14] - Bank liability costs are continuously decreasing, alleviating the pressure on net interest margins. The scale of bonds with high floating profits bought before the second half of 2024 has decreased after realizing floating profits last year, reducing the space and demand for banks to realize floating profits and thus lowering the risk in the second half of the quarter for the bond market [3][14] 2.3 Limited pressure from other capital markets on the bond market and potential new driving forces - Although the rise of other capital markets may impact the bond market, the impact is mainly through trading institutions such as funds and securities firms. The duration of these institutions has dropped to a low level. The duration of medium - and long - term public offering interest - rate bond funds decreased to 3.35 years at the end of 2025, lower than the 3.45 years at the end of 2024, which means limited continued adjustment pressure on the bond market [4][16] - If the market continues to strengthen, the leverage - increasing demand of funds and securities firms may become a new driving force for the bond market to strengthen [4][16] 3. Overall Market Trend and Strategy - The overall market trend is in a gradual recovery process. The dumbbell strategy is relatively more advantageous. Since the duration of allocation - type institutions is relatively high, the market direction is mainly determined by them. With the continuous decline of their liability costs, the cost - effectiveness of bonds as allocation assets has increased. The stable liabilities and insufficient real - economy financing demand lead to asset scarcity, enabling allocation - type institutions to continue increasing their bond holdings. Trading institutions mainly affect the speed of market recovery. If they quickly increase their positions, it will accelerate the decline of interest rates [6][21]

1. Report Industry Investment Rating No information provided on the industry investment rating in the report. 2. Core Viewpoints of the Report - The policy of the new Fed Chair is uncertain, and it's crucial to focus on subsequent policy statements and implementation [1][9] - The change in Fed policy currently has limited direct impact on the domestic bond market, while recent capital market volatility may help the bond market stabilize and recover [2][10] - The bond market will gradually recover. The actions of allocation - type institutions determine the direction of the bond market's recovery, and trading - type institutions affect the speed of recovery. The dumbbell strategy may be more advantageous [5][19] 3. Summary by Relevant Catalogs 3.1 Bond Market Performance This Week - The bond market was generally volatile this week, with limited changes in interest rates across different tenors. The 10 - year and 30 - year Treasury bond yields decreased by 1.9bps and increased by 0.2bps to 1.81% and 2.29% respectively. The yields of 3 - year and 5 - year secondary capital bonds increased by 3.0bps and decreased by 1.6bps respectively. The 1 - year AAA certificate of deposit rate remained at 1.60% [1][8] 3.2 Impact of Fed Chair Nomination on the Market - US President Trump nominated Kevin Warsh as the new Fed Chair, causing concerns about the uncertainty of Fed policy paths. This led to significant declines in the precious metals and stock markets [1][8] - The new Fed Chair's policy may be the result of multiple goals and factors, and it's not entirely based on pre - appointment stances [1][9] 3.3 Impact of Fed Policy on the Domestic Bond Market - Whether the Fed's monetary policy is hawkish or dovish, it has relatively limited direct short - term impact on the domestic bond market. There is no significant correlation between the long - term bond yield spread between China and foreign countries and capital flows in recent years, and the appreciation of the exchange rate does not constrain the domestic monetary policy [2][10] 3.4 Influence of Capital Market Volatility on the Bond Market - The recent capital market volatility may reduce risk appetite in the short term, which will slow down the bond - selling of non - bank institutions and help the bond market stabilize and recover [2][12] 3.5 Role of Allocation - Type Institutions in the Bond Market - Allocation - type institutions such as banks and insurance companies may continue to increase their bond market allocations, which is the main force for the market to stabilize. Their actions determine the direction of the bond market's recovery, while trading - type institutions affect the speed of recovery [3][5] 3.6 Bank Bond - Allocation Ability and Willingness - Currently, the fundamentals are weak, and the financing demand is insufficient. After the index adjustment, banks have sufficient bond - allocation ability and do not need to overly worry about supply risks [3][14] - The decline in bank liability costs increases their bond - allocation willingness, as bonds are more valuable for allocation. The 30 - year Treasury bond yield has also risen above the expected interest rate of ordinary life insurance, making ultra - long bonds more valuable for insurance companies [4][16]

Core Viewpoint - The bond market weakened in the last week before the holiday, with government bond rates rising while credit bonds strengthened. The expectation is for a recovery in the bond market post-holiday due to regulatory changes and easing bank pressure [1][7]. Group 1: Market Performance - In the last week before the holiday, the 10-year and 30-year government bond rates increased by 1.0bps and 4.4bps to 1.85% and 2.27%, respectively, while short-term rates also rose [1][7]. - Credit bonds showed strength, with 3-year and 5-year AAA secondary capital bond rates slightly declining, and the 1-year AAA certificate of deposit rate decreasing by 1.0bps to 1.63% [1][7]. Group 2: Regulatory Changes - The new public fund fee regulations, which are more lenient than the draft proposal, are expected to alleviate redemption pressure and support the bond market recovery. The final version allows for certain exemptions on redemption fees for long-term holders [1][7]. Group 3: Bank Pressure and Supply - The easing of bank indicator pressures, particularly from large banks, is anticipated to enhance overall allocation strength in the bond market. The Basel framework adjustment will reduce the parallel shift limit from 250bps to 225bps, effective January 1, 2026 [2][9]. - The government bond issuance plan for the first quarter is set at 2.1 trillion, lower than the 2.5 trillion planned for the same period in 2025, but with an accelerated issuance schedule [9][10]. Group 4: Credit and Funding Dynamics - The concentration of credit issuance in January is expected to impact the bond market. The proportion of first-quarter credit issuance has increased from 36.2% in 2020 to an estimated 59.8% in 2025, with January alone potentially accounting for 35% of annual credit [10][14]. - Despite the anticipated surge in credit issuance, current credit demand remains low, indicating that the impact on the bond market may be more rhythmical rather than trend-based [14][15]. Group 5: Future Outlook - The bond market is expected to recover post-holiday, with smoother recovery anticipated after late January, despite ongoing supply pressures and increased funding demands [15]. - The expectation is that the 10-year government bond may reach new lows in the first half of the year [15].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The overall bond market is expected to strengthen gradually in the future due to increased capital supply and decreased financing demand, but there will be structural challenges, especially for ultra - long bonds. The adjustment of ultra - long bonds may be nearing the end, but their stabilization depends on the changes in the selling power of trading institutions. The slope of the yield curve next year may be more determined by regulations. The structural pressure on ultra - long bonds is expected to ease in mid - to late December. It is recommended to conduct right - side trading and wait for the market to stabilize before making allocations. The bond market is expected to have a trending market from the end of this year to the first quarter of next year, and the 10 - year Treasury bond yield may hit a new low in the first quarter of next year [3][4][5] 3. Summary by Related Contents 3.1 Current Bond Market Situation - This week, the bond market saw a unilateral adjustment in ultra - long bonds. The 30 - year Treasury bond yield rose significantly by 7.2 bps to 2.26%, and the 50 - year Treasury bond yield soared by 9.7 bps. However, Treasury bonds with maturities of 10 years and less remained stable, with the 10 - year Treasury bond yield rising only slightly by 0.7 bps, and the yields of 1 - 3 - year Treasury bonds even declining slightly. Government financial bonds and Tier 2 capital bonds, which are held more concentratedly by public funds, also adjusted along with ultra - long bonds. The yield of 1 - year AAA certificates of deposit rose by 1 bps to 1.66% this week [1][8] 3.2 Reasons for the Overall Bond Market Strength 3.2.1 Capital Supply - The real estate slowdown will increase the capital supply in the bond market. The sum of the scales of household deposits, wealth management products, insurance, money market funds, and bond funds, which represents the capital source of the broad fixed - income market, showed a decline in growth in the first half of this year but has rebounded in recent months, mainly due to the impact of real estate. As household savings are relatively stable, but the structure of incremental household savings may change significantly, there is a high negative correlation between housing and low - risk financial assets. The recovery of real estate sales from the fourth quarter of last year to the first quarter of this year diverted the capital inflow into broad fixed - income assets, but with the recent weakening of the real estate market, the capital inflow into broad fixed - income assets such as household deposits and insurance premiums is expected to increase again in the next few months [2][12] 3.2.2 Financing Demand - The decline in the social financing growth rate means that the growth rate of asset supply will slow down in the next few months. This year, the year - on - year growth rate of social financing rebounded from 8.0% at the end of last year to a maximum of 9.0% in the middle of this year, mainly driven by government bonds, with government bonds increasing by nearly 3 trillion yuan year - on - year. Assuming a fiscal deficit of 4%, a special Treasury bond of 2 trillion yuan, and new special bonds of 4.5 trillion yuan next year, government bonds will increase by about 500 billion yuan compared with this year, a significantly smaller increase than this year. If the non - government bond social financing increment remains the same as this year, the social financing growth rate may slow down again in the first half of next year [3][13] 3.3 Reasons for the Adjustment of Ultra - Long Bonds - Banks, especially large - scale banks, have taken on a large amount of long - term bonds, resulting in excessive pressure on some indicators such as △EVE. Recently, the slowdown in insurance premium income and the shift of asset allocation towards equities have led to insufficient allocation power from traditional ultra - long bond buyers such as insurance companies. After the positions of trading institutions became too concentrated, concentrated selling led to a rapid adjustment in ultra - long bonds [3][19] 3.4 Future Outlook for Ultra - Long Bonds - After rapid selling by trading institutions such as funds and securities firms, their positions have decreased significantly, reducing the room for further selling. As the yield of ultra - long bonds adjusts, their relative cost - effectiveness has changed. The spread between mortgage loans and 30 - year Treasury bonds is at the lowest level since the third quarter of 2017, and the spread between mortgage loans and 30 - year local government bonds is at the lowest level since relevant data became available, increasing the attractiveness of ultra - long bonds to allocation - oriented institutions. Therefore, the adjustment of ultra - long bonds may be nearing the end, but their stabilization still needs to be observed in terms of the selling power of trading institutions [4][19] 3.5 Outlook for the Bond Market Structure Next Year - The slope of the yield curve next year may be more determined by regulations. If regulations continue to impose the same constraints on interest - rate risk indicators as this year, large - scale banks may continue to sell ultra - long bonds in the market, leading to a steeper yield curve. If regulations are adjusted or the central bank broadens the maturity range of bond purchases, the steepness of the yield curve will improve. The adjustment of regulatory indicators and the timing of such adjustments are highly uncertain. It is expected that the pressure on the long end will ease from the end of this year to the beginning of next year, and the slope of the yield curve is expected to recover [4][21] 3.6 Short - Term Outlook and Investment Recommendations - The overall supply - demand pattern will continue to drive the bond market to strengthen, and the structural pressure is expected to ease in mid - to late December. In the short term, the pressure on ultra - long bonds caused by selling by large - scale banks and trading institutions such as funds and securities firms still exists. It is expected that as the pressure on large - scale banks' indicators eases and the cost - effectiveness of ultra - long bonds increases after adjustment, allocation - oriented institutions will gradually increase their allocations, and the pressure is expected to ease starting in mid - to late December. Therefore, it is recommended to conduct right - side trading and wait for the market to stabilize before making allocations [5][22]

1. Report Industry Investment Rating No relevant content provided. 2. Core View of the Report The report predicts that the bond market will still strengthen seasonally in December this year, and although the "front - running" rhythm will be later, it will still occur. As short - term constraints such as profit - taking and indicator pressures ease, allocative institutions will gradually increase their bond allocations, and it is expected that the 10 - year Treasury bond yield will drop to around 1.7% (new bonds) by the end of the year [5][22]. 3. Summary According to Related Content Bond Market Adjustment This Week - This week, the bond market adjusted again. The yields of 10 - year and 30 - year Treasury bonds rose by 2.5bps and 2.7bps to 1.84% and 2.19% respectively. The yields of 3 - year and 5 - year secondary capital bonds rose by 5.5bps and 3.2bps respectively. The yield of 1 - year AAA certificates of deposit rose slightly by 0.5bps to 1.64% [1][8]. - The adjustment is due to institutional behavior changes. Banks face year - end indicator pressures and profit - taking needs, resulting in insufficient allocation power. Meanwhile, the reform of public fund fees has led to increased short - term selling pressure from passive redemptions of public funds, and some trading institutions such as securities firms have boosted the market trend [1][8]. Seasonal Strengthening of the Bond Market in December in Previous Years - In the past five years, the bond market in December has generally strengthened. From 2020 to 2024, the 10 - year Treasury bond yield declined in December, with an average decline of 14.0bps. In 2024, the decline was the largest at 34.5bps. Excluding 2024, the average decline from 2020 - 2023 was 8.9bps. The 1 - year AAA certificate of deposit yield also declined significantly in December, with an average decline of 18.2bps from 2020 - 2024 [8]. - The front - running effect occurred not only in bull markets (e.g., the end of 2021 and 2024) but also in bear markets (e.g., the end of 2020 and 2022). In bull markets, the yield decline started earlier. In 2024, the yield started to decline significantly in the last week of November, while in 2021 and 2023, it started around early December. In bear markets (2020 and 2022), the decline started in mid - December [8]. Reasons for the Weak and Volatile Bond Market in the Fourth Quarter - Banks have been continuously reducing their long - bond holdings since October due to indicator pressures (including interest - rate sensitivity and liquidity indicators) and profit - taking needs, with large banks facing the most significant pressure. These factors, combined with the impact of public fund fee reform, have led to the phased redemption of public funds by banks and wealth management products, resulting in selling pressure on public funds and constraining the bond market [2][12]. Easing of Current Pressures - Bank indicator pressures and profit - taking needs are more concentrated in the middle of the quarter, especially in the year - end quarter. Near the end of the quarter or year, these pressures tend to ease, and banks will have new allocation space at the beginning of a new year or quarter. The significant decline in the net financing volume of inter - bank certificates of deposit in the past two weeks indicates that the indicator pressures of joint - stock banks may have started to ease, and allocation demand will gradually recover [3][12]. - The impact of public fund fee reform has been digested to a large extent. The scale of public bond funds has significantly shrunk, decreasing by 51.27 billion shares from the end of June to October, nearly a 10% reduction. If the new regulations provide a sufficient transition period, the short - term impact may be limited [3][15]. Reasons for Allocative Institutions to Increase Bond Allocation - From a quantitative perspective, allocative institutions face the pressure of rising liability growth but insufficient asset supply. Banks are experiencing rising deposit growth and falling loan growth. Near the end of the year, if financial institutions expect low financing demand in the first quarter of next year, they may increase bond allocation in advance. The weak fundamental data in November (both manufacturing and service PMI are below the boom - bust line) indicates that corporate financing demand may be suppressed, and there is a possibility of a year - on - year decrease in credit and social financing in the first quarter of next year. At the same time, due to reduced residential housing purchases, residents' savings will accumulate more in low - risk assets, increasing the possibility of an asset shortage [4][18]. - From a price perspective, bond yields are more cost - effective. The spread between the same - term mortgage loan and the 30 - year Treasury bond in the third quarter of this year was 81bps, the lowest since mid - 2017, indicating that bonds are more cost - effective than loans and other assets [4][18].

Group 1 - The core viewpoint of the report indicates that the bond market is currently experiencing a phase of adjustment and recovery, with slight increases in interest rates across various maturities following a rapid decline in rates the previous week [1][10]. - The report highlights that the fundamental data does not present a clear signal for the bond market to adjust, with demand still under pressure despite a slight recovery in CPI and PPI growth rates [2][11]. - It is noted that the adjustments in the bond market since the third quarter are primarily driven by institutional behavior rather than fundamental or liquidity factors, with a significant reduction in bond fund positions due to increased risk appetite in the equity market [3][15]. Group 2 - The recovery in the bond market since October is largely attributed to non-bank institutions replenishing their positions, while the participation of banks and other institutional investors remains limited due to profit-taking pressures and regulatory constraints [4][19]. - The report suggests that the impact of bank regulatory pressures will be more evident in the early to mid-fourth quarter, as banks prepare for asset allocation for the upcoming year [5][20]. - Overall, the report concludes that the bond market will continue to recover amidst fluctuations, with expectations for smoother declines in interest rates towards the end of the fourth quarter, particularly for the 10-year government bond yield [6][24].

Report Industry Investment Rating The provided content does not mention the report industry investment rating. Core Viewpoints of the Report - The bond market is expected to continue its short - term volatile trend, but the adjustment space is limited. The long - term bond interest rate is expected to decline smoothly in the second half of the fourth quarter, and the 10 - year Treasury bond is expected to recover to around 1.6% - 1.65% by the end of the year. A neutral position across the holiday is recommended, along with leveraging and a dumbbell - shaped strategy [6][23]. Summary by Related Contents Bond Market Current Situation - This week, the bond market continued its weak and volatile trend. The yields of 10 - year and 30 - year Treasury bonds were 1.80% and 2.12% respectively, with changes of - 0.5bps and + 1.9bps from last week. The yields of 1 - year AAA certificates of deposit rose slightly by 1.0bps to 1.69%. The yields of 3 - year and 5 - year AAA - second - tier capital bonds rose significantly by 11.6bps and 17.9bps to 2.11% and 2.31% respectively [1][9]. Seasonal Characteristics of the Bond Market - There is no obvious seasonality in long - term bonds around the National Day. After the holiday, funds tend to be seasonally loose. In the past four years, the 10 - year Treasury bond yield decreased by an average of 0.9bp in the first week after the National Day and 0.2bp in October compared with the end of September. The funds in October were not significantly tightened. Considering the current insufficient financing demand and the central bank's care for liquidity, the overall funds are expected to remain loose, and R007 is expected to run around 1.4% - 1.5% [2][10]. Fundamental Analysis - In recent months, the financing demand has been weak, credit has increased less year - on - year, and the growth rate of social financing has slowed down. Even if 1 trillion of refinancing bonds are issued in advance in the fourth quarter, the supply of government bonds will still be about 0.7 trillion less than last year. The funds are expected to remain loose, and the asset shortage is expected to intensify. The recent weakening of fundamental data also means that economic stabilization requires low - interest rate support [2][13]. Analysis of Industrial Enterprise Profits - In August, the total profit of industrial enterprises increased by 21.5% year - on - year, a significant increase from - 0.7% in the previous month. Part of the improvement is due to the low base last year (a year - on - year decline of 22.2% in August last year), and the other part may be due to the increase in investment income from the good performance of the stock market. The year - on - year growth rate of the monthly operating income of industrial enterprises in August increased by 1.4 percentage points to 3.4% compared with July. The increase in profit may be more from investment income, and its sustainability needs further observation [3][14]. Stabilizing Forces in the Bond Market - As bond yields continued to rise in the third quarter, allocation - type institutions began to continuously buy bonds, which played a role in stabilizing the market. On the one hand, the current interest rate level is attractive compared with the liability cost of allocation - type institutions. On the other hand, large banks and other institutions are responsible for stabilizing the market, as the new revised evaluation indicators for primary dealers in open - market operations include bond - market making and assess their performance in stabilizing the market during bond - market fluctuations [4][17]. Uncertainties in the Bond Market - The reform of public - fund fees may affect the allocation power of non - bank institutions, especially when the consultation period for the draft opinion expires on October 5. Seasonal changes in some data, such as the possible seasonal rebound of the manufacturing PMI in September (an average increase of 0.3 percentage points compared with August in the past four years), may also affect market sentiment [5][18]. Investment Strategy - A neutral position across the holiday is recommended, along with leveraging and a dumbbell - shaped strategy (short - term credit/certificates of deposit + long - term interest rates). High - selling and low - buying band operations can be carried out for long - term interest - rate positions. The 10 - year Treasury bond with a yield above 1.8% still has allocation value [6][23].

1. Report Industry Investment Rating No information provided in the content. 2. Core Viewpoints of the Report - The over - rise of bond interest rates at the beginning of the year has been digested, but the bond market repair may not come quickly and is likely to gradually repair in fluctuations. The report suggests a dumbbell - shaped operation, i.e., short - term credit/certificates of deposit + long - term interest rates, and conduct high - selling and low - buying band operations on long - term interest rate positions. The 10 - year treasury bonds with yields above 1.8% still have allocation value, and the long - term bond interest rates may decline more smoothly in the second half of the fourth quarter, with the interest rates expected to hit new lows this year [6][20]. 3. Summary According to Related Content Bond Market Interest Rate Trends This Week - This week, bond interest rates rose again. The yields of the 10 - year and 30 - year treasury bond active bonds 250011.IB and 2500002.IB increased by 2.5bps and 5.5bps respectively compared with last week, reaching 1.79% and 2.08%. The 10 - year treasury bond active bond once exceeded the key point of 1.8%. The interest rates of certificates of deposit and credit also increased. The 1 - year AAA certificate of deposit interest rate rose 1.1bps to 1.68%, and the 3 - year and 5 - year AAA - secondary capital bond interest rates soared 10.0bps and 9.7bps to 2.02% and 2.14% [1][9]. Reasons for the Bond Market's Volatility This Year - In the first three quarters of this year, the overall bond market fluctuated and adjusted, making it difficult to obtain stable investment returns. Although affected by factors such as fundamental changes, large - bank bond selling, rising commodity prices due to anti - involution policies since the third quarter, the continuous strengthening of the stock market, and the recent public - fund fee - rate new regulations, the major background was that the over - rise of interest rates at the beginning of the year over - exhausted the subsequent space to some extent [1][9]. Evidence of Interest Rate Over - rise at the Beginning of the Year - From the perspective of capital return rate, interest rates are still in a downward trend. Since 2010, the enterprise return rate has been in a downward trend, with EBIT/total assets dropping from 10.4% in 2010 to 4.4% this year, with an average annual decline of about 40bps. The corresponding interest rates, especially the loan interest rates, have also been in a downward trend, with an average annual decline of 30bps since 2011. The loan interest rates are highly consistent with the bond interest rates. From October last year to January this year, the 10 - year treasury bond interest rate dropped by 56bps in total, resulting in a decline in the relative cost - effectiveness of the bond market and forming the continuous fluctuation pattern of the bond market this year [2][10]. Evidence that the Interest Rate Over - rise Has Been Digested - **Trend perspective**: If the 10 - year treasury bond interest rate drops by about 30bps annually, the bond market was basically over - rising in the first half of this year. By September this year, if the year - on - year interest rate decline is 30bps, the 10 - year treasury bond interest rate should be around 1.8%, which is consistent with the current level, indicating that the over - rise part has basically been digested [3][11]. - **IRS implied interest - rate cut expectation perspective**: Currently, the IRS no longer contains interest - rate cut expectations, and the expectation of monetary easing has basically been digested. Since the beginning of 2025, the IRS - FR007 spread once widened to about 50bp, but since August 5th, the FR007 - IRS (MA20) spread has been continuously positive, indicating that the market does not imply expectations of looser funds or interest - rate cuts in the next year [3][13]. - **Term spread perspective**: At the beginning of the year, the over - rise of long - term bonds and the tightening of funds led to a significant inversion of the yield curve. As of August 29th, the spread between the 1 - year certificate of deposit and R007 (20D MA) expanded to 16.2bps, significantly higher than the 2024 average of 6.2bps. The spread between the 10 - year treasury bond and the 1 - year AAA certificate of deposit reached 17.3bps, which is very close to the 2024 average of 17.5bps. With the normalization of the curve, the short - end loose liquidity is expected to protect long - term bonds from short to long [4][16]. - **Fundamental and explainable perspective**: By fitting and explaining the 10 - year treasury bond interest rate with GDP growth rate, the average of CPI and PPI, the capital price R007, and the time - trend term, it is found that although the interest rate dropped below one standard deviation of the fitting value in the first half of this year, indicating a certain degree of over - rise in the bond market, it returned to the one - standard - deviation fluctuation range after the interest - rate adjustment in the third quarter, indicating that the interest rate has entered the range explainable by fundamentals [5][17]. Factors Affecting the Bond Market in the Short Term - The stock market trend is uncertain. Although the stock - bond correlation has weakened, a rapid rise in the stock market may still impact the bond market when non - banks still hold a certain position. Public - fund fee - rate new regulations and quarter - end capital impacts may also affect the bond market in the short term. Additionally, the bond market is often seasonally weak in September and October [5][19][20].

Group 1: Report Industry Investment Rating - No information provided Group 2: Core Viewpoints of the Report - The bond market may gradually recover in an oscillatory and progressive manner as the correlation between stocks and bonds weakens and commodity pressure eases, but other markets, seasonal factors, and regulatory policies may cause oscillations during the recovery process. It is recommended to adopt a dumbbell - shaped operation, and long - term bond rates may decline more smoothly in the second half of the fourth quarter, with rates expected to hit new lows this year [4][6][18] Group 3: Summary by Relevant Content Bond Market Performance This Week - This week, both long - term and short - term bonds remained oscillating. The active bonds of 10 - year and 30 - year treasury bonds, 250011.IB and 2500002.IB, changed by - 1.25bps and 0.95bps respectively compared with last week, reaching 1.77% and 2.03%. After the month - end, the capital price remained loose, and the 1 - year AAA certificate of deposit stayed at around 1.67%. Credit interest rates declined slightly, with the 3 - year and 5 - year AAA - secondary capital bonds falling by 1.7bps and 1.9bps respectively compared with last week, reaching 1.92% and 2.05% [1][9] Weakening Impact of the Stock and Commodity Markets on the Bond Market - The impact of the stock and commodity markets on the bond market has gradually weakened. The 10 - day moving correlation coefficient between the daily interest rate change of the 30 - year active bond and the increase of the Shanghai Composite Index dropped from around 0.8 in late July to around 0.15 currently. On one hand, it is due to the change in bond institutional positions; on the other hand, the relative cost - effectiveness of bonds compared with stocks has gradually increased. Since the end of July, the commodity price index has continued to decline, and the Nanhua Industrial Product Price Index on September 4th has cumulatively dropped by 6.3% compared with the high on July 25th [2][10] Factors Protecting the Bond Market - The loose capital and banks' under - allocation are the main protections for the bond market. The fundamentals are still under pressure, the demand is not strong, and the financing demand is insufficient, so the loose capital situation remains unchanged. The future asset supply will further decline, and the net financing of government bonds in the next 4 months may significantly decrease compared with the same period last year. For banks, the deposit growth rate is rising while the credit growth rate is slowing down, so banks need to increase bond allocation to make up for the gap, and they may have a high willingness to increase allocation [3][10] Reasons for the Oscillatory and Progressive Recovery of the Bond Market - Other markets still impact the bond market. Although the seesaw effect between stocks and bonds has weakened, non - banks still hold a relatively high position in long - term bonds, and a significant rise in the stock market may lead to institutional selling and short - term bond market fluctuations. Seasonal factors may restrict the downward speed of interest rates. September is often a period of interest rate adjustment, and October is an oscillatory period. The new regulations on public fund redemption fees may reduce institutional willingness to invest in bond funds, and the redemption behavior may bring short - term adjustment pressure to the market [4][14][17]