The Research On The Term Structure Of Interest Rate Of China’s Interbank Government Bond

The interest rate is the percentage of the total interest and the amount of borrowing money in specific time.It is not only the basis for a variety of financial asset pricing,but also an important indicator of national macro-control.The term structure of interest rate refers to the relationship between the rate of return of funds and maturity,reflecting the market demand for funds.At the same time,it’s rich in macroeconomic information and the research between the term structure of interest rates and macroeconomic variables is one of the emphasis in the financial field.In this paper,firstly the related theory of the term structure of interest rates are reviewed,including the theory of formation of the term structure of interest rates and the development of interest rate term structure fitting models and the relationship between the term structure of interest rates and macroeconomic variables.Then this paper takes the Nelson-Siegel model as a tool for an empirical analysis on the term structure of interest rates in inter-bank bond of China,then obtained the level factor of NS model,the slope factor of NS model and the curvature factor of NS model.After obtaining the three factors of NS model,this paper makes further analysis of the three factor sequence.The first step,this paper compared the three factors with the proxy variable of traditional term structure of interest rate and analysis of the similarities and differences between them.The second step,the sequences of the three factors were simulated by a first-order auto-regressive model to predict the future values of factors and evaluated the fitting goodness of the predicted values.The third step,using a hidden Markov model to study the state transition of the term structure of interest rates.Finally,using linear regression model to study the effects of macroeconomic variables on the term structure of interest rates.The main conclusions of this paper are: firstly,the Nelson-Siegel model can appropriately fit the term structure of interest rates of inter-bank bond of China;Secondly,three factors have a strong correlation with the proxy variable of traditional term structure of interest rate,so the three factors have a clear economic significance;Thirdly,The first-order auto-regressive model can properly predict the future term structure of interest rates in the short term,but poorly predict the term structure of interest rate of long-term;Fourth,the term structure of interest rate of inter-bank bond of China exists state transition in the short term,and the mean values of hidden states are-1.87 and-3.35.Although GDP and CPI have a significant correlation with the term structure of interest rate,the results of linear regression model show that the influence of GDP and CPI on the term structure of interest rate is very slight.GDP,CPI and inter-bank offered rate have significant correlation with the slope factor,linear regression model showed that inter-bank offered rate had obvious effect on the slope factor.When the inter-bank offered rate rises,the value of slope factor will decrease.CPI also has a significant impact on the slope factor and when CPI rises,the value of slope factor will decrease while GDP has only a slight effect on the slope factor.The curvature factor have a hardly significant correlation with selected macroeconomic variable,and therefore there isn’t any linear regression model for curvature factor.