New Trends in Financial Markets: Investors Favor "Long" Over "Short", with a Preference for Fixed and Long-term Holdings
Recently, the Banking and Securities Regulatory Commission published its "China Banking Financial Market Half-Year Report" (2025 Semi-Annual), showing that as of the end of the first half of this year, cash management type financial products accounted for 25.79% of the total volume of open-ended financial products, a decrease of 4.38 percentage points from the beginning of the year and 7.09 percentage points from the same period last year.
Image source: "China Banking Financial Market Half-Year Report"
As of the end of June, the proportion of closed-end products with a term of over 1 year to the total volume of closed-end products was 72.86%, an increase of 5.71 percentage points from the beginning of the year and 4.99 percentage points from the same period last year.
In summary, the scale of cash management type financial products has decreased significantly, while the holding scale of closed-end products with a term of over 1 year has increased significantly. The product holding period is showing signs of regularization and long-termization, reflecting the adjustment of investors' asset allocation structures in response to falling deposit interest rates.
On July 28, an investment officer from a certain bank's subsidiary company revealed that the reason behind this phenomenon is that financial institutions are placing more emphasis on quality rather than short-term gains.
The year-on-year yield of cash management type financial products has fallen significantly
From a yield perspective, the average annualized return for financial products in the first half of 2025 was 2.12%, while the average return for financial products in the same period last year was 2.80%. The decline from the previous year is 0.68 percentage points.
According to data from Pu Ji Standard, as of June 30, 2025, the average near-7-day annualized return for cash management type financial products nationwide was only 1.46%, a decrease of 135 basis points from the end of 2021.
As of the end of June, the average near-1-month annualized return for open-ended fixed-income financial products (excluding cash management type financial products) was 2.9%, which is higher than the average near-7-day annualized return for cash management type financial products by 1.44 percentage points.
From a yield perspective, the difference between different term financial products is significant. According to data from Pu Ji Standard, as of June 30, 2025, the average annualized returns for various term financial products were: daily open-ended type financial products, 1.874%; near-1-month type financial products, 2.6635%; 1-3 month type financial products, 2.7714%; 3-6 month type financial products, 2.8324%; and 6 months to 1 year type financial products, 2.7917%. The average annualized return for financial products with a term of over 1 year was 2.8598%, while the average annualized return for financial products with a term of over 3 years was 2.1115%.
In particular, under the background of repeated interest rate cuts in deposits, the yield of cash management type financial products has shown a downward trend. The main part of the assets allocated to cash management type financial products are cash and bank deposits.
For example, a certain cash management type financial product plan holds that the financial instruments invested include but are not limited to cash, bank deposits with a term of less than 1 year (including 1 year), bond repurchase agreements, central bank bills, and interbank deposit notes.
The asset allocation distribution for this product in the second quarter of 2025 shows that the first-ranked asset category is interbank deposit notes, accounting for 61.58%; the second-ranked asset category is cash and bank deposits, accounting for 15.23%; and the third-ranked asset category is bond repurchase agreements and bond purchases, accounting for 12.12%. The assets allocated to bond repurchase agreements and bond purchases are mainly formed by financial institutions' borrowing from each other.
Note that on May 20, state-owned commercial banks began a new round of deposit interest rate cuts, with the one-year term deposit interest rate falling below 1% after the cut-off date.
Under the background of deposit interest rates being lowered, financial product holding periods are also showing signs of regularization and long-termization, which is related to bank deposits being lowered.
The yield-generating effect of bond markets helps push investors' preference for longer-term holdings
An investment officer from a certain commercial bank analyzed the adjustment of investors' preferences for financial products, saying that "from a technical perspective, since March 18 this year, the price of 10-year government bonds has risen significantly, until April 9 it started to fluctuate and continued until July 7. This period is a good time for bond trading and generating profits. For long-term bonds with a term of over 1 year, their duration will be longer and their yields will also be better." The investment officer noted that in the face of continuous profit-generating effects from bond markets, investors' preference for holding periods has shifted towards longer-term holdings.
Image source: "China Banking Financial Market Half-Year Report"
He further analyzed that the detailed data for January to March can be divided into two segments. From January to the Chinese New Year, the stock market was low, and many funds, especially institutional funds, chose to allocate assets to bonds under an avoidance sentiment. However, after February 7, the DeepSeek concept emerged, the stock market rose, bond prices fell, and until March 18, there were net losses in bond allocations. Looking back at the first half of the year as a whole, the bond market still showed yield-generating effects.
An analyst from the Construction Bank's financial markets department, Zheng Kai-feng, pointed out that in the first half of 2025, bond yields fluctuated sharply before stabilizing. As of March 17, the yield curve for 10-year government bonds had reached its highest point since the beginning of the year, with a yield of around 1.9%. The yield curve for 1-year government bonds also rose to around 1.59%, up from its lowest point at the beginning of the year.
From March 18 to June 30, bond yields continued to fluctuate before stabilizing. As of June 23, the yield curve for 10-year government bonds had fallen by 25 basis points to around 1.64%, while the yield curve for 1-year government bonds had also fallen by 23 basis points.
Zheng Kai-feng noted that a series of relaxation measures have been implemented, including interest rate cuts and credit easing, which have increased the attractiveness of bond investments.