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Recently, under the resonance of favorable policies in monetary and fiscal areas, the stock market has seen several rapid increases, attracting widespread attention from investors. At the same time, influenced by changes in market expectations, an increase in investors' risk appetite, and some investors withdrawing funds from the bond market to invest in the stock market, the bond market has experienced a phase of rapid decline.

Choice data shows that from September 24 to October 14, the China Bond Index (Net Price) fell by a total of 0.94%. Currently, institutions such as insurance funds, public funds, commercial banks, bank wealth management, securities asset management, and trusts all hold a large amount of bond assets, among which insurance funds, bank wealth management, and public funds are the "major" bond holders. For example, as of the end of June this year, life insurance companies' allocation ratio to bonds exceeded 48%; the allocation ratio of bank wealth management institutions to bonds exceeded 43%; some public funds and small and medium-sized commercial banks have significantly increased their bond allocation this year.

Therefore, the impact of the current bond market fluctuations on the balance sheets of financial institutions and investors' wealth management returns is not lower than the impact brought by stock market fluctuations. At present, major favorable policies in different fields have been introduced one after another, and the core variables affecting the bond market, such as policy, capital, sentiment, and fundamentals, have also undergone significant changes. Therefore, financial institutions should be prepared in advance and make forward-looking bond market investments based on new changes. In fact, forward-looking investment is also the due meaning of financial institutions buying bonds.

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Firstly, recognize the overall trend and allocate bonds reasonably.

Judging the overall trend of the bond market is the top priority for financial institutions. Since last year, although the bond market has experienced a phase of decline, it has generally shown a bull market, which has stimulated the enthusiasm of financial institutions to allocate bonds. Many institutions have continued to increase their bond allocation ratio, and there was even a rare phenomenon of "scrambling to allocate" interest rate bonds, leading to the yield of medium and long-term interest rate bonds such as ten-year government bonds continuously hitting historical lows, which has also attracted the attention of regulatory authorities.

A core logic for financial institutions to allocate a large proportion of bonds is that they believe that as China's economy transitions from high-speed growth to high-quality growth, market interest rates will also continue to decline, and allocating bonds can lock in a higher risk-free interest rate in advance. However, looking at the current situation, with the introduction of a series of major favorable policies recently, market expectations and confidence have shown a certain degree of positive change, and other factors supporting the continuous rise of the bond market have also undergone significant "quantitative changes". Therefore, financial institutions urgently need to re-evaluate the overall trend of the bond market and make reasonable investment decisions.

Secondly, prevent risks and use leverage cautiously.

At present, the bond market has experienced a phase of decline, but the decline is not significant, and the negative impact on financial institutions is not obvious. However, when significant factors affecting the bond market trend change, financial institutions should comprehensively assess and promptly prevent potential interest rate risks, market risks, and liquidity risks. In fact, the price changes of bond varieties such as long-duration bonds are very sensitive to interest rate trends. Once interest rates reverse, the prices of long-duration bonds purchased earlier may experience a significant decline. Since April this year, the People's Bank of China has continuously warned of the interest rate risks implied by excessively low long-term bond interest rates. In addition, when the market has significant differences in the trend of the bond market, financial institutions also need to use leverage cautiously to avoid large losses due to sudden market reversals.

Furthermore, do a good job in investment education to avoid negative cycles.

After the implementation of the new wealth management regulations, many wealth management products of financial institutions use market value methods to measure the latest changes in net value. Although this measurement method is beneficial for investors to understand the changes in product net value in a timely manner, if the bond market undergoes a deep adjustment, it is very easy to resonate with investors' risk-avoiding emotions and give birth to a negative cycle of "bond market decline - wealth management products are redeemed - financial institutions sell bonds - bond market further declines". Therefore, financial institutions should continue to do a good job in investment education, strengthen communication with investors, and avoid negative cycles impacting the balance sheets of financial institutions and damaging the rights and interests of investors."Preparation ensures success, while lack of preparation leads to failure." By the end of August this year, the custody balance of the bond market had reached a staggering 167.9 trillion yuan. The vast bond market connects the financing needs of the real economy on one end and the asset allocation needs of a vast number of investors on the other. As an important intermediary institution in the bond market, the forward-looking layout and rational investment of financial institutions will play a crucial role in stabilizing the long-term interest rate trends, promoting the smooth and healthy development of the bond market, and better serving the real economy.