Restructuring of Offensive and Defensive Strategies for Fixed-Income Fund Managers Amid the 2026 Volatile Bond Market

Based on the latest market research and views from professional institutions, I will systematically analyze the restructuring of offensive and defensive strategies for fixed-income fund managers amid the 2026 volatile bond market.

---

Since the second half of 2025, the bond market has experienced significant adjustments. Taking the 10-year treasury bond yield as an example, it was approximately 1.65% in early July 2025, and nearly reached 1.9% on January 7, 2026, representing an upward move of 25 basis points[1]. Against this backdrop, the net value of pure bond funds has come under pressure. As of January 15, 2026, the Pure Bond Fund Index has only risen 0.05% in the past 6 months, the Medium- and Long-Term Pure Bond Fund Index has fallen 0.51%, and the net value of more than 270 pure bond funds has declined by over 1%[2].

Challenge Dimension	Specific Performance
Unfavorable Odds	Absolute interest rate level below 2%, narrow spread space
Failure of Traditional Frameworks	Pricing based on traditional logics such as fundamentals and liquidity has become blunted
Declining Coupon Income	Yields are at historically low levels, leading to a sharp contraction in coupon income
Intensified Gaming	Influx of large amounts of capital, leading to fierce gaming among trading institutions
Liability-Side Pressure	Equity market recovery and assets such as gold divert capital

As Li Guandi, Fund Manager of the Fixed-Income Investment Department of China Europe Fund, stated: “The real challenges facing current bond investment are unfavorable odds, as well as changes to traditional framework logics and the paradigm of bond investment systems.”[2]

---

The “Negative Duration” strategy is emerging as a key risk hedging tool in volatile markets:

: By constructing a portfolio of “short-term liabilities + shorting long-term assets”, the portfolio duration is made negative, thereby capturing capital gains during interest rate hike cycles[2].

:

• When interest rates clearly enter an upward trajectory
• During the steepening phase of the yield curve
• When long-end interest rates face significant pressure at the start of 2026

: Utilize short positions in treasury bond futures to hedge interest rate risks of other assets in the portfolio, achieving excess returns relative to the pure cash bond benchmark[2].

:

• Brokerage proprietary trading desks are the most active (stable capital, flexible trading, rich tools)
• Public fund institutions are constrained by regulatory position limits, and mainly use this as a risk hedging tool
• By the end of Q3 2025, there were 141 public fund products holding treasury bond futures, showing a clear “short-dominated” pattern[2]

:

Company	Number of Products
Harvest Fund	14
E Fund	14
China Merchants Fund	10
Ping An Fund	7
Bosera Fund	6

:

• High threshold and prominent transaction costs
• Misjudging the direction of interest rates may lead to portfolio losses, with magnitudes far exceeding those of ordinary bond portfolios
• Need to pay attention to risks from changes in the basis between treasury bond futures and cash bonds, as well as term mismatch risks[2]

As Simayi Maimaiti, Fund Manager of Dongxing Fund, pointed out, the combination of weakened liability-side stability and scale contraction pressure has put forward higher requirements for portfolio liquidity management[2]. Fund managers need to:

• Increase the proportion of highly liquid assets in the portfolio
• Refine the management of liability-side maturity structures
• Set aside sufficient positions to meet redemptions

---

As Ma Long, Assistant General Manager of Tianhong Fund, believes, after continuous adjustments in the bond market, the overall coupon income and spread levels of bond assets have improved, and the effectiveness of multiple traditional segmented strategies has begun to return[3]:

Strategy Type	Application Logic
Riding Strategy	Utilize the steepening of the yield curve to capture excess returns
Leverage Strategy	Increase leverage to enhance returns in a stable liquidity environment
Product Rotation	Rotation opportunities between interest rate bonds and credit bonds
Credit Downward Migration	Appropriately migrate down the credit spectrum to obtain coupons under controllable risks

As the volatile pattern of the bond market is established, convertible bonds, as core assets of “Bond Plus”, have received widespread attention:

: The CSI Convertible Bond Index has broken through 500 points for the first time in a decade, and the net value of some hybrid bond funds has risen by more than 7% since the start of the year[4].

:

• Combines bond-like downside protection with equity-like upside elasticity
• Provides upward elasticity against the backdrop of a recovering equity market
• Combines coupon income with the value of conversion options

: Hybrid bond funds such as Golden Eagle Yuanfeng, Huashang Convertible Bonds, and Harvest Wenhong have ranked among the top performers, with equity positions ranging from 17% to 19%[4].

As Li Gang, Chief Investment Officer of China Merchants Fund, pointed out, the scale of “Bond Plus” funds has achieved a year-on-year growth rate of up to 40%, while the scale of pure bond funds has shrunk, reflecting changes in client demand and asset allocation logic[5].

:

• Low-Volatility Stable Type
  : Mainly allocates high-grade credit bonds + a small amount of convertible bonds
• Medium-Volatility Balanced Type
  : Appropriately increases equity positions (5%-15%)
• High-Volatility Aggressive Type
  : Increases the proportion of convertible bonds and equity assets

:

• China Post Wealth Management: Is transitioning from a credit bond strategy focused on coupon allocation to a “Bond Plus” multi-asset allocation strategy
• Caitong Asset Management: Improving the product gradient layout of “Low-Volatility - Medium-Volatility - High-Volatility”
• First Venture Asset Management: Focusing on the core track of medium- and low-volatility “Bond Plus”
• Zhongtai Asset Management: Launching secondary bond funds with a 5% equity lower limit[6]

---

Ma Long of Tianhong Fund: The 2026 bond market will return to the “old normal” — banks will become the dominant players in marginal pricing, and some sectors may face a situation of oversupply[1].

Yan Lingyi, Fixed-Income Analyst of Zhongtai Securities: It is expected that the 10-year treasury bond yield will range between 1.7% and 2.1% in 2026, and the spread between 30-year and 10-year treasury bonds may return to around 50 basis points[7].

Market Phase	Recommended Strategy	Core Logic
Interest Rate Hike Period	Negative Duration Hedging + Short-Duration Strategy	Avoid interest rate risks and capture hedging gains
Interest Rate Cut Period	Riding Strategy + Leverage Strategy	Seize capital gain opportunities
Volatile Market	Barbell Allocation + Bond Plus	Balance defense and offense
Unclear Trend	Product Rotation + Refined Market Timing	Flexibly respond to uncertainties

As Chang Ming, Deputy General Manager of Jinchengsheng Assets, suggested: The low-interest-rate era requires investors to shift from the “farmer” mindset of intensive cultivation to the “herdsman” mindset of moving with the water and grass, adopting a “barbell” allocation — one end with highly liquid assets, and the other end with concentrated risk assets[5].

---

Yan Lingyi analyzed that three changes in the 2026 bond market need to be focused on:

• Bond market pricing power gradually returns to the banking proprietary trading system
• Bond market pricing logic expands from single bond market institutional behavior to stock-bond linkage and liability-side behavior
• Changes in secondary market pricing of long-duration bonds may reversely affect primary market issuance structures[7]

Ma Long pointed out: As some funds from funds and insurance companies withdraw from the bond market, marginal pricing in the bond market may shift back to banks. However, the liability growth rate of large banks cannot keep up with asset growth pressure, there is uncertainty about the undertaking capacity of small and medium-sized banks and rural commercial banks, and the allocation demand of insurance institutions is also shifting to various assets[1].

---

┌─────────────────────────────────────────────────────────────┐
│                2026 Fixed-Income Strategy Restructuring     │
├─────────────────────┬───────────────────────────────────────┤
│      Defensive System       │              Offensive System              │
├─────────────────────┼───────────────────────────────────────┤
│ • Negative Duration Strategy Hedging     │ • Convertible Bond Allocation (Core of Yield Enhancement)            │
│ • Short-Duration Strategy as Main Focus     │ • Return of Traditional Segmented Strategies (Riding, Leverage, Rotation)  │
│ • Strengthened Liquidity Management     │ • "Bond Plus" Product Layout (Multi-Asset Allocation)           │
│ • Reduce Portfolio Volatility       │ • Moderate Exposure to Equity Assets                      │
├─────────────────────┼───────────────────────────────────────┤
│                Core Objective: Balance Drawdown Control and Yield Enhancement             │
└─────────────────────┴───────────────────────────────────────┘

1. Excess Cognitive Ability
   : Li Guandi emphasized that it is necessary to “use excess cognitive ability to make trading decisions that differ from market consensus but are highly likely to be correct and consistent with common sense”[2].

2. Multi-Asset Allocation Ability
   : The future development of public funds will rely more on multi-asset allocation capabilities, in-depth research systems, and technology empowerment[5].

3. Refined Strategy Execution
   : In the context of declining trend opportunities, it is more necessary to rely on arbitrage transactions and yield curve strategies to accumulate gains amid repeated fluctuations[7].

4. Product Gradient Layout
   : Build a product gradient of “Low-Volatility - Medium-Volatility - High-Volatility” to meet the needs of investors with different risk preferences[6].

---

[1] CLS.com - “Fixed-Income Veteran Ma Long Speaks: Bond Market Returns to the ‘Old’ Normal” (https://www.cls.cn/detail/2255031)

[2] Eastmoney.com - “Bond Market Investment 2026: Fixed-Income Fund Managers Restructure Offensive and Defensive Systems” (https://finance.eastmoney.com/a/202601193622726962.html)

[3] Tianhong Fund - “Crossing·New Journey 2026 Annual Investment Strategy Conference”

[4] Yian Financial Advisory - “70% of Medium- and Long-Term Pure Bond Funds Report Negative Returns Since the Start of the Year” (https://yanglee.com/Research/Details.aspx?i=139799)

[5] 21st Century Business Herald - “How the Bond Market Consolidates Foundations and Explores New Paths: The 2026 Panorama Emerges” (https://www.21jingji.com/article/20260117/herald/2a84c821b14adc051f23b29eebbba266.html)

[6] Securities Times - “Brokerage Asset Management Faces Transformation Test: ‘Bond Plus’ and Alternative Assets Break Through on Two Fronts” (https://www.stcn.com/article/detail/3595739.html)