Monetary Policy, The Impact Of China's Treasury Yield Curve

The key point in the finance subject is the pricing of financial assets. It is the focus of both academic field and practical field. There are two factors that we must consider during the pricing process: one is expected cash flow in the future, and another is discount rate. No matter what kind of financial assets, if we know these two factors, we can get their prices. So interest rate is a really important variable, which is mean for macro economic control or micro financial pricing.The paper review the whole developing history of the term structure of interest rate theory, compare the differences of kinds of models. And then have the empirical test of the data from our country's bonds markets so that make sure the features of our interest rate and the impact of monetary policies to the term structure.The results are that, there are long-term stable connection between 1-year yield rate and 10-year yield rate. And M2 and statutory reserve rate have effect on the term structure, which shows the term structure in our country becomes flatter under tight monetary policy and becomes steep under loose monetary policy. The investors in the market have confidence in our monetary policies taken by the government. And our term structure can provide some important information for the monetary authority.