1. Report Industry Investment Rating No relevant content provided in the report. 2. Core Viewpoints of the Report - Since July, the allocation demand for credit bonds from funds, other product categories, and insurance has increased. Credit spreads have mostly narrowed or remained flat due to strong demand, with 1Y varieties showing strong resistance to decline and lower-rated bonds performing better than higher-rated ones [1][10][11]. - Currently, both credit bond coupons and credit spreads are at low levels, and the market trend is more dependent on institutional allocation demand. It is necessary to closely monitor institutional behavior, buying sentiment, and the potential compression space of credit spreads [1][12]. - Overall, the supply - demand pattern in July is favorable for credit bonds, and there is still a small amount of compression space for credit spreads. Specific strategies include focusing on short - to medium - duration bonds with credit rating sinking, and high - grade 10Y bonds have relatively large potential compression space for credit spreads [3][22]. - In the bank capital bond market, although the spread protection is thin, there is still compression space. Long - duration bonds of large banks and 2 - 3 year bonds of small and medium - sized banks are recommended [5]. 3. Summary by Related Catalogs 3.1. Credit Bond Market Overview - From July 1 - 11, funds' net purchase of credit bonds reached 88.5 billion yuan, a year - on - year increase of 39.1 billion yuan. Other product categories and insurance had net purchases of 31.3 billion and 15.2 billion yuan respectively, with year - on - year increases of 7.8 billion and 5 billion yuan [1][11]. - From July 7 - 11, with the convergence of funds and the rotation of negative factors, the bond market fluctuated upwards. Credit bonds, due to strong allocation demand, saw most credit spreads narrow or remain flat [10]. 3.2. Factors Affecting Credit Bond Market 3.2.1. Institutional Behavior - Fund net trading volume of credit bonds is a sensitive indicator related to credit spread trends. Maintaining a daily net purchase of over 500 million yuan helps keep credit spreads low. From July 7 - 10, the rolling 5 - day net purchase was 1 - 1.4 billion yuan, but it dropped to 740 million yuan on the 11th, and was below 500 million yuan on the 10th and 11th [2][12]. 3.2.2. Buying Sentiment - The TKN成交占比 is used to measure buying sentiment. A stable TKN成交占比 above 75% indicates good buying sentiment. From July 7 - 11, as yields rose, the TKN成交占比 declined, with three days below 70%, but the rolling 5 - day average was around 70% [2][16]. 3.2.3. Potential Compression Space of Credit Spreads - By observing the position of credit spreads relative to the mean - 2 times the standard deviation, it is found that currently, each variety still has a small amount of compression space, with 10Y varieties having relatively large potential [3][22]. 3.3. Specific Bond Types Analysis 3.3.1. Urban Investment Bonds - From July 1 - 13, urban investment bonds had a net financing of 28.8 billion yuan. The primary market issuance sentiment was good, with the proportion of full - subscription multiples over 3 times remaining at 61%. The issuance rate of long - term bonds decreased significantly, with the 10 - year average dropping to 2.14% [30][32]. - In the secondary market, short - term bonds were resistant to decline, while the yields of 3 - 10Y bonds increased. The trading activity decreased, and Shenzhen Metro had many high - valuation transactions [35][38]. 3.3.2. Industrial Bonds - From July 1 - 13, industrial bond issuance and net financing increased year - on - year. The issuance sentiment weakened slightly, and the proportion of long - term issuance over 5 years decreased significantly. The buying sentiment in the secondary market weakened, and the trading duration increased [40][42]. 3.3.3. Bank Capital Bonds - From July 7 - 13, several banks issued secondary capital bonds and perpetual bonds. In the secondary market, yields generally rose, spreads showed differentiation, and low - grade, short - duration bonds performed better. Currently, credit spreads are at relatively low levels, but there is still compression space [45][46]. 3.3.4. TLAC Bonds - By comparing the yields of 3Y, 5Y, and 10Y AAA - secondary capital bonds with TLAC bonds, the spreads are analyzed. As of July 11, 2025, the 3Y, 5Y, and 10Y spreads were 3.1bp, 3.8bp, and 1.4bp respectively, indicating that 10 - year TLAC bonds are more cost - effective [53]. 3.3.5. Commercial Financial Bonds - Since 2021, the valuation of 3Y AAA commercial financial bonds has generally followed the trend of interest - rate bonds, with a stable spread center. As of July 11, the credit spread was 14bp, at a relatively low level [57].

Group 1: Report Summary - Investment Rating: Not provided in the report - Core View: In the second half of 2025, credit bond investment should focus on three elements: the trend of funds and interest rates, the supply - demand pattern of credit bonds, and the cost - effectiveness of different varieties. Interest rates may continue to decline in a volatile manner, making the coupon value of credit bonds prominent, but the valuation volatility may increase. The overall supply of credit bonds may be difficult to expand, and the configuration demand may weaken from August to December. Different investment strategies are recommended for different periods and varieties [1][18] Group 2: 1. Steady Coupon as the Foundation, Grasp the Trading Rhythm 1.1. Short - to Medium - Duration Credit Spread Compression for Coupon Income, Seize Phased Opportunities in Long - Duration Bonds - H1 2025 Review: The credit bond market experienced an increase in yields and a widening of credit spreads from January to mid - March, followed by a rotation of the market to medium - to long - duration and then ultra - long - duration bonds from April to June. The main factors in the first quarter were the tight funds and the change in wealth management scale. In mid - to late March, the bond market recovered, driven by supply shrinkage and the cost - effectiveness of varieties. From April to June, the market was affected by interest rate fluctuations and the shift of the funds' central point [12][13] - June 2025 Highlights: The long - duration credit bond market was activated, mainly due to the compression of short - to medium - duration credit spreads to historical lows and the increased demand from funds, insurance, and other products. The scale of credit bond ETFs increased by 7.7 billion yuan in June, which also drove the demand for some long - duration component bonds [14][16] - H2 2025 Outlook: Interest rates may continue to decline in a volatile manner. The supply of credit bonds may be difficult to expand, with the decrease in urban investment bonds offset by the increase in industrial bonds. The wealth management scale usually increases significantly in July but weakens from August to December. The rectification of wealth management's net - value smoothing methods may suppress the demand for ultra - long - duration and low - rated medium - to long - duration bonds. It is recommended to increase positions in July, take profits in August, and reduce credit bond positions from August to December, switching to inter - bank certificates of deposit and interest - rate bonds [18][19][21] - Variety Cost - Effectiveness: The 10Y high - grade credit bonds have relatively large potential for credit spread compression. As of June 30, the credit spreads of 10Y high - grade medium - term notes are still 8 - 11bp higher than the average. Short - to medium - duration credit spread compression may still be the dominant strategy. Bonds with a yield of 2.0% - 2.2% in the 1 - 3 - year AA and AA(2) categories have high allocation value. High - grade 5 - year bonds can be considered when the credit spread adjusts to the mean + 1 standard deviation [22][30][35] 1.2. Grasp the Trading Rhythm of Bank Capital Bonds 1.2.1. Difficult for Bank Capital Bond Supply to Expand in H2 2025 - H1 2025 Review: The supply of bank capital bonds increased slightly. The net financing of secondary capital bonds increased year - on - year, while that of perpetual bonds decreased. The city commercial banks increased their issuance scale, while the supply from rural commercial banks was weak [39] - H2 2025 Outlook: The demand for new capital bonds from the Big Four banks may decrease after the capital injection in June. Although small and medium - sized banks may increase issuance if the cost is low, the overall net supply is difficult to expand [40] 1.2.2. Narrower Bandwidth for Band - Trading in Bank Capital Bonds, Reverse Trading May Yield Higher Win - Rates - H1 2025 Review: The yields of bank capital bonds showed differentiation. The yields of 1 - 5Y large - bank bonds generally increased, while those of 10Y secondary capital bonds and 1 - 4Y small - and medium - bank bonds mostly decreased. The credit spreads of most varieties compressed, with short - duration and low - grade bonds performing better [44] - H2 2025 Outlook: The bank capital bonds still have trading opportunities following interest - rate bonds, but the credit spread compression space is limited. Reverse trading (increasing positions during adjustments) may have a higher win - rate. The 4 - year and 6 - year bonds have higher riding yields and better holding experiences [50][51] Group 3: 2. Urban Investment Bonds: Negative Net Financing in H1, a Historical First - H1 2025 Supply: The supply of urban investment bonds shrank, with negative net financing for the first time in history. From January to June, the issuance was 2.9464 trillion yuan, a year - on - year decrease of 382.9 billion yuan, and the net financing was - 71.7 billion yuan, a year - on - year decrease of 218.5 billion yuan, mainly due to the tightening of bond - issuing policies [55] - Issuance Characteristics: The overall issuance sentiment was good, with a high proportion of over - subscribed issuances. The proportion of 3 - 5 - year issuances increased, while that of within - 1 - year issuances decreased. The issuance interest rates decreased overall, with greater declines in short - to medium - term bonds [55][56] - Regional Differences: The net financing performance of urban investment bonds varied by region. Most regions had negative net financing, mainly affected by district - level and park - level platforms. Guangdong and Shandong had relatively high positive net financing, while Jiangsu, Hunan, and Chongqing had large negative net financing [58] - Yield and Credit Spread: The yields of urban investment bonds generally decreased in H1, with high - grade long - duration and AA - low - grade bonds performing better. The credit spreads of all maturities and grades narrowed, with low - grade bonds performing more strongly [62][63] - Secondary Market: Since mid - March, the buying interest in the secondary market has been high, with a high proportion of TKN transactions and low - valuation transactions. There was a trend of increasing duration in transactions, and the proportion of AA(2) low - grade transactions remained high [66] Group 4: 3. Industrial Bonds: Supply Increase, Longer Durations in Both Primary and Secondary Markets - H1 2025 Supply: The issuance and net financing of industrial bonds increased year - on - year. From January to June, the issuance was 3.8718 trillion yuan, a year - on - year increase of 309.2 billion yuan, and the net financing was 1.0788 trillion yuan, a year - on - year increase of 40 billion yuan. The new regulations on science and technology innovation bonds contributed to the increase in issuance [18] Group 5: 4. Bank Capital Bonds: Low - Rated Bonds Perform Better, Weak Trading Sentiment - H1 2025 Performance: The yields of bank capital bonds showed differentiation, with short - duration and low - rated bonds performing better. The credit spreads of most varieties compressed, with 1 - 4Y small - and medium - bank capital bonds and 1 - 3Y AA - perpetual bonds having significant spread compression [44] - Trading Rhythm: The trading bandwidth of large - bank long - duration capital bonds has been narrowing, making band - trading more difficult. Reverse trading may be a better strategy. The 4 - year and 6 - year bonds have higher riding yields [48][51]

Core Viewpoint - Agricultural Bank successfully issued 30 billion TLAC bonds in the interbank market, marking the first combination issuance of three maturities in the financial bond market this year [1] Summary by Categories Issuance Details - The bond issuance consists of three maturities: 150 billion for 3+1 years at an interest rate of 1.83%, 30 billion for 5+1 years at an interest rate of 1.87%, and 120 billion for 10+1 years at an interest rate of 2.06% [1] Financial Strategy - The bank has set up a mechanism for additional issuance, with an excess issuance of 10 billion allocated entirely to the 10+1 year maturity, which helps ensure compliance with TLAC requirements while further optimizing the liability structure [1]

1. Report Industry Investment Rating - No information provided regarding the industry investment rating [1] 2. Core Viewpoints of the Report - In the past two weeks, interest - rate bonds fluctuated downward. Institutions continued to explore credit - bond spreads, with long - duration bonds becoming the focus. The 10 - year credit spread has significantly compressed. The trading sentiment of credit bonds is quite extreme. Considering the usual significant decline in wealth - management scale in the last week of June, credit bonds may experience short - term fluctuations. Accounts with unstable liability ends are not advised to chase the rising market but can make arrangements during adjustments. Accounts that have already invested in long - duration credit bonds earlier do not need to rush to take profits as there is still some allocation demand in July. Additionally, there is still room for the spread of long - duration credit bonds to compress [1][3] 3. Summary According to Related Catalogs 3.1 City Investment Bonds - Net financing remains weak. From June 1 - 22, 2025, city investment bonds issued 3781 billion yuan, matured 3767 billion yuan, and only achieved a net financing of 14 billion yuan, a year - on - year decrease of 791 billion yuan. The primary issuance sentiment declined, with the proportion of full - field multiples above 3 times dropping by 14 percentage points to 62%. The proportion of issuances with a term of over 3 years further increased to 45% [31] - Short - end issuance rates continued to reach new lows. In June, the issuance rates of city investment bonds continued to decline. The rates for bonds with a term of less than 1 year, 1 - 3 years, and 3 - 5 years decreased by 10bp, 7bp, and 15bp respectively compared to May, reaching 1.76%, 2.19%, and 2.51% [33] - In the secondary market, long - end bonds performed strongly, with yields of many terms reaching new lows. From June 16 - 20, yields of city investment bonds across all terms declined. The decline in medium - and short - end yields was limited, mostly within 3bp, while most long - end bonds with a term of over 5 years declined by more than 5bp, and credit spreads also compressed [36] - From the broker transaction data, bonds of all terms were traded at a discount to valuation, with long - term bonds over 5 years performing the best. The daily transactions of city investment bonds were still active, with daily transactions often exceeding 800, and the average discount to valuation per trading day was around 2bp. The average discount to valuation of long - term bonds over 5 years was 2.8bp [41] 3.2 Industrial Bonds - In June, the issuance and net - financing scale of industrial bonds increased significantly year - on - year. From June 1 - 22, industrial bonds issued 6187 billion yuan, a year - on - year increase of 1345 billion yuan, and achieved a net financing of 3050 billion yuan, a year - on - year increase of 1425 billion yuan. The comprehensive, public - utility, and non - bank financial industries had relatively large net - financing scales [43] - The issuance sentiment weakened. The proportion of full - field multiples above 3 times decreased from 38% to 30%, while the proportion of 2 - 3 times increased from 24% to 30% [43] - The proportion of medium - and long - term issuances increased. Since June, the proportion of industrial bonds with a term of less than 1 year decreased from 40% in May to 31%, while the proportions of 1 - 3 years, 3 - 5 years (including 5 years but excluding 3 years), and over 5 years increased to 40%, 18%, and 12% respectively [43] - From the broker transactions, the buying sentiment of industrial bonds was high. The TKN proportion remained at 79%, and the proportion of discount - to - valuation transactions increased from 65% to 66%. The transaction duration lengthened, with the proportion of transactions over 5 years increasing by 5 percentage points to 19% [45] 3.3 Bank Capital Bonds - In the primary market, from June 16 - 22, 2025, Xi'an Bank and Qingdao Rural Commercial Bank each issued a 20 - billion - yuan 5 + 5 - year secondary capital bond. The issuance rate of Xi'an Bank was 2.30%. Minsheng Bank issued a 300 - billion - yuan 5 + N - year perpetual bond with an issuance rate of 2.30% [48] - In the secondary market, yields of bank capital bonds declined across the board, and spreads showed differentiation. 10 - year secondary capital bonds and medium - and long - term perpetual bonds performed better. Specifically, yields of 1 - 5 - year secondary capital bonds generally declined by 2 - 4bp, with credit spreads fluctuating narrowly. The 10 - year secondary capital bond yield declined by 5bp, and the spread narrowed by 2bp. Bank perpetual bonds outperformed secondary capital bonds, with most credit spreads narrowing by 0 - 4bp [48] - From the broker transactions, from June 16 - 20, the number of bank capital bond transactions increased significantly month - on - month, and the trading sentiment was good. The TKN proportion was above 68%. The proportions of discount - to - valuation transactions of secondary capital bonds and perpetual bonds increased by 2 and 1 percentage points respectively to 70% and 77%. In terms of the term structure, state - owned bank transactions were still concentrated in long - duration bonds with good liquidity. The proportion of 4 - 5 - year secondary capital bond transactions of state - owned banks increased by 3 percentage points to 54%, while that of perpetual bonds decreased by 4 percentage points to 60%. Joint - stock bank transactions reduced the duration [51] - Regarding TLAC bonds, by subtracting the average yields of 3 + 1, 5 + 1, and 10 + 1 TLAC bonds from the yields to maturity of 3Y, 5Y, and 10Y AAA - secondary capital bonds, the spreads of secondary capital bonds over TLAC bonds were obtained. As of June 20, 2025, the spreads of 3Y, 5Y, and 10Y secondary capital bonds over TLAC bonds were 3.5bp, 7.5bp, and 4.8bp respectively, indicating that the 10 - year TLAC bond was more cost - effective at present [54] - For commercial financial bonds, taking the 3Y AAA commercial financial bond as an example, since 2021, its spread has mostly fluctuated between 10 - 30bp, with a stable spread center at 20bp. As of June 20, the credit spread of the 3Y AAA commercial financial bond was 14bp, at a relatively low level compared to the spread center [58]