There exists a continued bullish trend in the bond market.

On December 20th, bond markets surged once again, with the yield on one-year government bonds dropping below 1% for the first time since 2010. Meanwhile, the yield on ten-year bonds approached the critical mark of 1.7%, and thirty-year bond yields have now fallen below 2%.

Thanks to market catalysts, some bond funds have posted annual returns exceeding 20%, outperforming many equity fundsNew products are attracting considerable attention from investors, with twelve bond funds surpassing a launch size of 5 billion yuan in December alone.

The highest bond fund returns have even exceeded 20%!

As the bond market rises, bond funds are experiencing booming profits, with certain funds achieving returns over 20% this year.

According to Wind data, as of December 19, the yield for the Everbright BOCOM International Medium and High-Grade Bond Fund reached 20.54%, making it the top fund in its category

Following closely, the Pengyang 30-Year Government Bond ETF announced returns of 20.17%. Other bond funds, including the ICBC Credit Suisse Ruiying 18-Month Regular Open Bond Fund and the Galaxy 0-3 Year Policy Financial Bond Index Fund, also reported annual returns above 15%.

Specifically, the Everbright BOCOM International Medium and High-Grade Bond Fund, managed by Assistant General Manager Huang Bo, holds substantial amounts of convertible bonds, effectively capitalizing on both the bond bull market and the rebound of the equity market.

Similarly, the ICBC Credit Suisse Ruiying Fund also maintains a significant position in convertible bondsFund manager Zhou Hui noted that during the reporting period, both economic and financial data were weak, leading to low growth expectations among investors

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As market preference for risk increases, one can see that capital has consistently flowed into the bond market this year, with the market thus appearing overvaluedTherefore, the fund has kept its pure bond duration and leverage levels low while maintaining a neutral to slightly high position in equities; with ongoing purchases of convertible bond assets, the fund has primarily focused on bond-like convertible bonds and balanced convertible bonds.

In contrast, the Pengyang 30-Year Government Bond ETF is among the few long-term bond funds, being the first ETF in the market to track the 30-year treasury bond indexOn December 13, the yield on 30-year government bonds dropped below 2% for the first time, leading the index to increase with an annual return exceeding 19%.

The issuance market for bond funds is thriving.

With the bond bull market propelling enthusiasm, the issuance of bond funds has surged considerably.

Wind statistics show that by December 20, a total of 60 new funds had been established this month, with a cumulative issuance scale of 98.167 billion yuan

Among them, new bond funds accounted for a whopping 83.654 billion yuan, constituting over 85% of the totalIn terms of individual product fundraising, 12 bond funds collected over 5 billion yuan each, including the Fortune Zhongbond Preferred Investment Grade Credit Bond Index Fund and the Chang Sheng 0-3 Year Policy Bond Fund, both exceeding 6 billion yuan in initial fundraising.

Regarding the recent bond bull market and the hot selling of bond funds, Huang Bo, Assistant General Manager at Everbright BOCOM International, emphasized that “moderately loose” monetary policy fuels bullish sentiment in the bond market, with investors preemptively trading for year-end market conditionsThe decrease in bond market rates may be experiencing early reflections of anticipated monetary loosening.

Morgan Stanley Funds' Fixed Income Investment Department's Tang Hailiang remarked that based on bond market trends, significant term yields have soared above previous lows with the bond market continuing on a bullish trajectory as we approach the end of the year

After fluctuations in October and November, institutional strategies were notably adjusted, leading to large variations in the level and shape of the yield curveHowever, as local government debt supply pressures materialize and policy meetings come to fruition, it becomes evident that securities firms, funds, banks, and insurance groups are rotating buy-ins.

The bond market is expected to be more volatile in 2025.

Looking forward to the bond market in 2025, fund companies generally suggest that while there maintains a continuation of the bullish trend in the bond market, operational difficulties are anticipated to increase overallThe market may face a new environment characterized by lower static returns and greater volatility.

Yongying Fund remarked that given the heightened external pressures and increasing internal difficulties, supported by more proactive macro policies, the economy is expected to continue stabilizing and recovering

With fiscal and monetary policies increasingly expansive, the liquidity conditions are set to further loosen next yearNevertheless, the time lag in the transmission of this liquidity toward the real economy and its eventual improvement suggests that the bond market is navigating favorable winds, constituting the primary driver behind this recent bond market surge.

"Should there be a stabilization in housing prices, ongoing improvements in economic fundamentals, and upward trends in corporate profitability, the necessity for further monetary easing is likely to diminishSubsequently, the bond market may encounter adjustment pressure, with anticipated volatility in the bond market increasing operational complexity requiring heightened liquidity and flexibility," Yongying Fund added.

Huang Bo articulated that according to the Central Economic Work Conference, macro policies, micro policies, fiscal policies, and monetary policies will strengthen coordination and collaboration next year

The firm foundations of the Chinese economy remain steady, with numerous advantages, strong resilience, and significant potentialThe long-term supportive conditions and fundamental trends have not alteredTherefore, as we look ahead, bond yields may exhibit greater fluctuations corresponding with continued improvements in economic fundamentals.

Tang Hailiang analyzes that the bond market next year may show the following tendencies:

On one hand, the strengthening trend in the bond market shows continuity, with a wide monetary policy taking precedence over credit expansionUnder the guise of moderately loose monetary policy and ample liquidity, expectations exist for further declines in funding costs; meanwhile, the real economy is now focusing on new productive forces, meaning industries overly reliant on funding, such as real estate and local government financing, may no longer experience the same frenetic growth observed in previous cycles