Huatai Fixed Income: Snack bonds supply and demand slightly warm, coupon interest takes priority.

Huatai Credit stated that since 2022, the development of Dim Sum bonds has been rapid, with municipal bonds being the main expansion target. By early September 2025, the outstanding amount of Dim Sum bonds exceeded 1.5 trillion yuan, with credit bonds and Chinese entities as the main issuers, having a short maturity structure and concentrated coupon rates of 3-4%. Due to the expansion of southbound channels, a slowdown in the supply of municipal Dim Sum bonds, and relatively ample offshore Renminbi liquidity, the yield of Dim Sum bonds declined significantly from April to July 2025. Looking ahead, on the supply side, oversight of municipal foreign debt issuance remains strict, making it difficult for municipal Dim Sum bonds to see significant increases in the short term, while high-quality financial/industrial bonds and green bonds are expected to expand with regulatory support. On the demand side, the widening of cross-border investment channels, strong institutional interest in overseas investment, and potential Renminbi appreciation space indicate potential incremental demand for Dim Sum bonds. It is recommended that investments in Dim Sum bonds focus on coupon rate strategies, with an emphasis on the middle and short end. It is also suggested to lengthen the duration of investments in investment-grade financial/industrial bonds and moderately increase allocations to the middle and short end of municipal bonds.