The Research On Credit Spreads Of China’s Bond Market

The advent of short-term financing bonds in 2005,opened the prelude of real Chinese credit bond market.After ten years of development,credit bond varieties enriched,the issuing scale has been expanded rapidly,investors increasingly diversified.However,in the first few years,due to thecommercial bank guarantee for bond,the lack of default,rating stability of credit rating,the credit risk has not been taken seriously by investors.In recent years,especially since 2014,credit rating changes frequently,Bond defaults occur repeatedly,credit risk is increasingly attracting the attention of investors,which all are reflected in the bond credit spreads.It is in this context,the credit spreads are studied in this paperThe credit spreads of bonds has been researched by Foreigners for many years.In the course of the study,three basic theoretical models of the Structural Model,the Reduced-Form Model and the Credit-Rating Model are gradually formed.However,in the empirical study of credit spreads,the scholars found that the model does not explain all the credit spreads,and the market exists "the credit spread puzzle".Credit bond market in China has maintained a lower default rates,credit spreads are far higher than the default loss rate,and higher than international level for a long time.At the same time,Credit spreads of Chinese bond market also show the suitable inverse rate periodically and the reverse credit cycle,since the outbreak of credit default in 2014,credit spreads fall but not rise.This paper empirically test "the credit spread puzzle" in the credit bond market of China with Merton model and analyzed the related theory,and think that although credit spreads from credit risk,but it is not only reflect the default loss.The inconsistencies Model default loss distribution with the actual default loss,liquidity risk,the change of supply and demand caused by market risk preference changes all will affect the credit spreads.These factors,which affect the credit spreads,at the same time are under the influence of both macroeconomic and financial market.These macroeconomic and financial market factors include:the macroeconomic growth,inflation,the risk-free interest rate levels,monetary policy,the supply of credit bonds,the structure of market investors,investors leverage,other asset markets,and financial market system,etc.This paper empirically examines the impact of these factors on China’s credit bond credit spreads,the results show that in the absence of bond credit default of China’s bond market,these factors may influence the trend of China’s credit spreads.Due to bonds with many guarantees and lack of default in the early market credit bonds,credit rating has been relatively stable.But with the bond credit risk events happened in recent years,Credit rating adjustments occur frequently,so the impact of the credit rating on credit spreads is one of the research emphasis of this paper.This paper analyzed theoretically the influence of the credit rating,debt guarantees and"city investment bond "invisible guarantee,credit rating adjustment on credit spreads,and then empirically examined the influence.In the process of the rapid development of bond market,the credit rating is still an important basis for investors to pricing.At the same time,investors will take into account the influence of the credit guarantee and invisible guarantee for bond prices.But the influence of different nature of the guarantor on credit spreads is different,the effect of different administrative level and financial strength of the government on credit spreads is not the same.Although investors will refer to the credit rating of bonds pricing,but investors in the quality of credit rating still holds a certain skepticism.This reflected in the the empirical research on the influence of credit rating adjustment on credit spreads in this paper.The empirical results show that the investors can appear overreaction when the credit rating is downgraded,while they are often delayed response when credit rating is upgraded.Since crdite defaults occur,although Credit spreads tend to shrink,the market is more concerned about credit risk.The empirical results also show that since 2014 the changes of credit spreads is mainly caused by the macroeconomic downturn,loose monetary policy,interest rates overall downward and financial institutions credit risk preference rising and lever behavior.If in addition to these factors,this period of market credit risk premium is rising.Another evidence that investors pay more attention to the credit risk of the credit bond is the industry spreads began to differentiate.This paper empirical also show before April 2014 between industry credit spreads and industrial added value growth rate,there is no significant correlation,but after April 2014,a strong correlation is exitsed between strong cyclical industry credit spreads and industrial added value growth rate,because of the obvious differentiation of credit risk caused by the economic cycle.In this paper,the study of these issues is still tentative,after all,The appearance of substantive credit default in the bond market of China is not long,available samples and data for study are limited.The default is the path which must be passed in the credit bond market.With the development of credit bond market and credit default normalization,there will be more information for further research on credit spreads.