China's Bond Investment Market

In recent years, the scale of bond issues of China expand gradually, bond investments have also developed rapidly. With the steady growth of the domestic economy, the investment market improved gradually, the future of China's bond market will have great development space. At the same time, in the steady development of China's bond market, there are still many shortcomings and constraints in institutional constraints of the market, in particular the size of corporate bonds, variety, and there is a huge gap with the developed countries in degree of market development. This article based on market segmentation hypothesis-two bond market:one characterized by an excess demand for low-risk credits and the other characterized by an excess supply of higher risk credits. The empirical results show that the volume of bonds issued each quarter is influenced by the average yield spread between high-and low-risk bonds. On the other hand, in a quarter, the average spread will be influenced by bond issuance of high-risk and low-risk bonds. These findings emphasize the role of market segmentation and investor risk aversion on the use of catalytic bond. Therefore, China should speed up the construction of bond credit rating system, and can resolved problems in China's bond market through the introduction of bond insurance to improve China's bond market, and to be an international market. Because China's bond market still in development, in the stage of constantly improve, the theory of bond investment of bond market in China also needs continuous inspection and correction, combined with the development of the reality of CHINA, deepening refined to form a set of stock market based on the theoretical system.