Empirical Analysis On Term Structure Of Interest Rate Of China's Treasury Bonds

The theories and models on term structure of interest rates are one of the most challenging works in finance research and an important fundamental branch in fixed income securities and financial engineering field.This article reviews recent twenty years'evolving process of theories of interest rate first, then analyze serial classical models under general equilibrium and no-arbitrage frames. This article try to fit the yield curve shape of China's treasury bonds using the static Empirical Analysis and fit the general treasury bonds yield curve shape. Operate an order difference to yield curve trunk different point of the yield to maturity of the Shanghai Stock Exchange government bonds and then study the yield curve of the dynamic changes using the Principal Component Analysis (PCA). And finally get some meaningful conclusions.Using cubic polynomial model, the article get the term structure of interest rates of treasury bonds in Shanghai Stock Exchange of April 2007. As the result, (a) cubic polynomial model to simulate the term structure of interest rates of treasury bonds have a strong practical and effective. (b) on the basis of the analysis of the characteristics of government bonds such as yield curve shape, the level of interest rates, some problems such as treasury bonds yield curve flatten, irrational structure of the national debt, the existence of long-term government bonds yields are low, short- and long-term yield curve spreads too small appear. These problems should be emphasized. (c) Through the study of the changes in the yield curve for government bonds, empirical results show that the bond market exchanges continuously improve the effectiveness.At present, there are still a lot of not conducive to the formation of sound and reasonable term structure of interest rates in China's treasury bond market, These issues are focus of the future reform of the bond market, therefore, Some suggestion to improve the term structure of interest rates of treasury bonds proposed.