Analysis of China's Asset Allocation Strategy Against the Background of Slowing Incremental Capital Inflows into the Bond Market

Based on the latest market data and professional research analysis, the following is an in-depth analysis of the impact of slowing incremental capital inflows into the bond market on asset allocation strategies:

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The current bond market is experiencing a phase of slowing incremental capital inflows. From the perspective of the 30-year treasury bond futures trend, which is more sensitive to market expectations, the main contract 2603 fell in 4 out of 5 trading days in the past week, once dropping to

intraday, hitting a new low since October 2024 [1]. Billion-dollar private equity Luoken International pointed out that the 30-year ultra-long-end treasury bond yield broke through the previous high in the second half of 2025, rising unilaterally by more than 40 basis points, reflecting market concerns about fiscal expansion, weakened demand for long-term bonds, and inflation expectations [1].

Driving Factor	Specific Performance
Strengthened economic recovery expectations	PPI has registered month-on-month growth for 5 consecutive months, and CPI rose 0.8% year-on-year
Rising capital risk appetite	The stock market continues to hit new highs, with margin balance flowing back
Rebounding inflation expectations	Commodity markets are strong, with non-ferrous metal prices rising
Imbalanced bond supply and demand	The net supply of rate bonds is expected to reach 17.4 trillion yuan in 2026

The Shanghai Composite Index closed at

on January 10, 2026, hitting a 10-year high, up 0.92% from the previous trading day [0]. The total margin balance of the two markets reached 25,434 billion yuan, with the return of pre-holiday risk-averse capital becoming an important driving force for the market’s upward movement [3]. In stark contrast, the domestic bond market continues to be under pressure, with the 30-year treasury bond futures falling 1.28% for the week, hitting a new low since October 2024 [2].

• Equity markets are rising in resonance at home and abroad, with the resource and dividend sectors fully active
• Capital continues to spill over from low-interest deposits, with stocks offering better cost-performance than bonds
• The scale of public funds has increased significantly, with equity funds benefiting from the strong equity market
• The scale of active pure bond funds has shrunk sharply, while “fixed income plus” products have expanded significantly

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Factor	Impact Analysis
Moderately accommodative monetary policy	Core support; the interest rate cut is expected to reach 20BP in the first to third quarters of 2026
Reduced exchange rate constraints	Further interest rate cuts by the U.S. will ease the pressure on RMB appreciation
Ample liquidity	Capital interest rates remain low, and bank liability costs are expected to ease

Factor	Impact Analysis
Inflation rebound pressure	PPI is expected to turn positive around the middle of 2026
Alleviated asset shortage pressure	Continued cuts in deposit interest rates and insurance predetermined interest rates weaken allocation demand
Changes in supply structure	The net supply of rate bonds reaches 17.4 trillion yuan, about 1.4 trillion yuan higher than 2025

• Overall characteristics
  : “Wide-range fluctuations with a mild upward center”
• Trading range of 10-year treasury bond yield
  : 1.6% to 2.1%
• Rhythm judgment
  : Oscillatory bullish in the early stage, adjustment pressure in the later stage
• Increased trading attributes
  : Features of “low interest rates + high volatility + a floor below and a ceiling above”

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In view of the slowing incremental capital inflows into the bond market and the stock-bond seesaw effect, it is recommended that investors re-examine their asset allocation structure:

Asset Category	Recommended Ratio	Allocation Logic
Equity Assets	35-45%	Economic recovery expectations + policy support, with tech and high-end manufacturing as the main themes
Bond Assets	25-35%	Grasp band opportunities for rate bonds, focus on coupon strategies for credit bonds
Commodity Assets	10-15%	Gold for hedging + non-ferrous metals benefiting from reflation expectations
Cash and Alternatives	10-20%	Maintain liquidity to cope with market volatility

• Grasp the pace of monetary policy easing, pay attention to phased opportunities in short-term varieties
• It is recommended to adopt a “duration neutral strategy” to avoid the duration risk of ultra-long-term bonds
• Proactively increase allocation during the interest rate cut window in the first quarter, and focus on avoiding adjustment risks in the second to third quarters

• Focus on the “coupon strategy” as the core, and seize structural opportunities
• Prioritize allocating high-rated short-duration credit bonds to build a safety cushion
• Pay attention to the allocation value of sci-tech innovation bonds and urban investment transformation industry bonds
• Focus on laying out varieties with a maturity of around 3 years, adopting a combination of “short-end coupons + medium-to-long-term timing”

Allocation Strategy	Recommended Direction	Representative Product Types
Core Position Strategy	Dividend value style	High-dividend, dividend selection funds
Barbell Strategy	Dividend + tech high-end manufacturing	Dual barbell portfolio, balanced allocation
Event-Driven	Technological innovation, consumption upgrade	Sci-tech theme, consumption theme funds

• Tech Growth
  : AI, semiconductors, high-end manufacturing (benefiting from policy support)
• Resource Cycle
  : Non-ferrous metals, petroleum and petrochemicals (benefiting from commodity price increases)
• Dividend Defense
  : Banking, public utilities (bond-like alternatives in a low-interest environment)
• Consumption Recovery
  : Discretionary consumption, service consumption (benefiting from economic recovery)

Many institutions believe that there are significant scale growth opportunities for bond-like strategy products such as multi-strategy, FOF, fixed income plus, and CTA quantification that replace the high-interest era [1]. It is recommended to focus on:

• Fixed Income Plus Products
  : Products that benefit from convertible bond opportunities and adopt a barbell strategy
• Short-Term Bond Products
  : Core strategy allocation, pay attention to liquidity management capabilities
• Gold ETFs
  : Allocate from the perspective of asset allocation and hedging investment

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Investor Type	Equity Position	Bond Duration	Commodity Allocation	Recommended Strategy
Conservative	20-30%	1-3 years	5-10%	Focus on short-term bonds + dividends
Moderate	35-45%	2-5 years	10-15%	Balanced “core position + barbell”
Aggressive	50-60%	3-5 years	15-20%	Growth-oriented + cycle allocation

• Trigger Threshold
  : Initiate rebalancing when any asset category deviates from the target allocation by more than 5%
• Adjustment Frequency
  : Quarterly assessment, annual adjustment
• Liquidity Management
  : Maintain a 10-15% cash position to cope with emergencies

Time Node	Focus	Potential Opportunities
First Quarter of 2026	Pace of monetary policy easing	Trading window for short-end rate bonds
Second to Third Quarters	Inflation and supply pressure	Avoid long-duration rate bonds
Fourth Quarter	Economic and policy directions	Re-seek allocation directions

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Risk Type	Specific Performance	Response Measures
Inflation Risk	PPI turning positive pushes interest rates upward	Shorten bond duration, increase inflation-protected assets
Policy Risk	Fiscal and monetary policy convergence	Maintain portfolio flexibility
Liquidity Risk	Increased bond market volatility	Maintain sufficient liquidity, allocate high-rated bonds
Geopolitical Risk	Global supply chain disruptions	Appropriately allocate hedging assets such as gold

1. Avoid Chasing Gains and Selling at Losses
   : Short-term volatility in the bond market has increased, and investment resolve must be maintained
2. Control Portfolio Volatility
   : Reduce overall risk through asset class diversification
3. Focus on Marginal Changes
   : Closely track economic data and policy signals
4. Regular Review and Adjustment
   : Dynamically optimize allocation based on market changes

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[1] Securities Times - “Seesaw Effect Emerges! Incremental Capital Inflows into the Bond Market Slow Down” (https://www.stcn.com/article/detail/3584999.html)

[2] Industrial and Commercial Bank of China - “Early-Year Government Bond Supply Pressures the Bond Market, CSRC Revises Regulations on Bond Fund Redemption Fees” (https://icbc.com.cn/page/1181992204870283264.html)

[3] East Money - “Market Continues to Rise on Increased Volume; Bond Market Faces Pressure as Stock Market Strengthens” (https://caifuhao.eastmoney.com/news/20260106192115627011460)

[4] Xinhua Finance - “2026 Bond Market Outlook: Seeking Opportunities in Volatility” (https://www.bjrcb.com/pc/cn/touzilicai/zixun/zqzx/20260106/186456.shtml)

[5] Sina Finance - “In 2025, the Bond Market Framework Failed” (https://finance.sina.com.cn/roll/2025-12-31/doc-inheshqq9087898.shtml)

[6] The Paper - “Institutional Views on 2026 Fund Allocation Strategies” (https://m.thepaper.cn/newsDetail_forward_32353168)