Small and medium-sized banks rotate between offense and defense in bond investment, with duration strategy returning to prudence.

Recently, the 10-year government bond yield has continued to decline, reaching a historical low of 1.6414% as of October 22. Institutions have become increasingly cautious in their trading stance toward long-end instruments. "Our control over the scale of financial investments began long ago; we have not added any bond positions this year," acknowledged a source from the financial markets department of a rural commercial bank in the western region. However, some small and medium-sized banks said their bond investment business is still being carried out at the original pace. The underlying logic of bond investment by small and medium-sized banks is being reshaped. Over the past two years, many small and medium-sized banks have relied on extending duration and capturing band spreads through trading books to support non-interest income. Now, this model faces triple pressures: regulatory guidance, risk control concerns, and liability-side constraints. Against this backdrop, small and medium-sized banks have shifted their operations from "selling short and buying long" to "buying short and selling long," with their overall strategy gradually transitioning from trading-driven to passive allocation centered on coupon lock-in and liquidity management.