The Analysis Of Influence Factors Of The Quasi-municipal Bond Spreads In China

Local revenue is always under strain after the tax system reform, besides, the demand for capital by local governments increased as the pace of urbanization in china accelerated, however, the local governments are forbidden clearly by law to issue bonds, so the local government began to establish their own investment and financing platform to raise fund from the market, thus Quasi-municipal Bond came into being. Unique background resulted in its special use of the raised fund, Quasi-municipal Bond are mainly invested to infrastructure or municipal projects.As a kind of bond, Quasi-municipal Bond owns its characteristics when compared with another bonds. First of all, Quasi-municipal Bond in legal terms without any guarantee, however, because of the close relationship between the enterprise and the local government, makes it for the government’s more recessive guarantee. Second, the enterprise of Quasi-municipal Bond owns its special financial-characteristic. Generally speaking, the asset scale huger, the income out of business will be much more, and the flows of business operation cash less. At last, Quasi-municipal Bond usually is with low level of subject-credit and high level of bond-credit. What is more, due to the no-sound law, the information of Quasi-municipal Bond is not disclosed timely and accurate.Through theoretical and empirical analysis, the author draws the following conclusions. First, both credit risk and liquidity risk are the important factors. Second, in the micro level, investors pay more attention to regional factors rather than the operations of the enterprise. Third, in the macro level, CPI has impact on the Quasi-municipal Bond spreads in the short term; GDP, CPI and indicator of the width of bond market have impact on the Quasi-municipal Bond spreads in the long term. Fourth, the loan-to-deposit ratio of commercial bank has no influence on the Quasi-municipal Bond spreads. Finally, CPI is negatively correlated with the Quasi-municipal Bond spreads in short term, but is positively correlated with the Quasi-municipal Bond spreads in long term.At last, this thesis proposed six policy recommendations, strengthening the independence of the Urban Construction Investment Companies, strengthening the market liquidity of the Quasi-municipal Bond, establishing system of repayment and supervision, promoting the healthy and stable development of the local economy, improving information disclosure mechanism, and improving relevant laws and regulations.The entire study attempts to provide an effective basis for controlling the risk of Quasi-municipal Bond. Ensure the factors, extent and direction of influence in Quasi-municipal Bond spreads, this initiative can:first of all, policy-maker can ensure the influence factors to provide evidence for regulatory. Second, each government can control the impact of factors to reduce the risk of Quasi-municipal Bond, narrowing the spreads of Quasi-municipal Bond, and reducing the cost of financing of the enterprise by adjustment. At last, it also can provide evidence to Credit rating agencies for credit rating.The main contribution of this thesis:1. Quasi-municipal Bond’s spreads studied in this thesis is the margin between the closing yield on the secondary market with the same period of government bonds yield to maturity rate, which better reflects the true value and more fully reflects the information.2. Considering a variety of factors. Previous research about Bond spreads influencing factors mostly consider credit risk influencing factors or liquidity risk influencing factors, in addition) most of the research only considers the micro level or macro level, and fails to consider both. In this thesis, all the influencing factors above are taken into consideration, and then empirical analysis is done to find a more comprehensive explanation of the spread change of the Quasi-municipal Bond in china.3. Deeply analysis is done using factor analysis. Previous empirical analyze about bonus spreads influencing factors is mostly use regression analysis directly. However, the economic indicators are easily correlated to each other, so in this thesis, factor analysis is used to extract the factors that are important for explain and independent to each other before regression analysis. Thus it can more clearly identify the variables that affect the spreads of Quasi-municipal Bond.