An Empirical Analysis On Interest Spreads Between Asset Backed Security And Corporate Bonds

Normally,a bond spread is the difference in yield between a bond and another debt security.The bond spread is the excess return required from the higher credit risk,liquidity risk,and economical system risk.The existing literatures calculate the bond spread mainly choices the Treasury bonds as a benchmark yield.Relevant researches rarely use the bond spread which is the yield between asset-backed securities and corporate bonds.About the proxy variables reflecting bond spread,the early studies mainly focused on the factors of credit risk.With the deepening and development of study,the liquidity factors and the macroeconomic factors have also become the proxy variables for interpreting bond spread.And relevant researches results show that the R2 of the model can be promoted if the liquidity factors and the macroeconomic factors join the analysis model.This paper study the asset-backed securities and corporate bonds in the interbank bond market of China,and the bond samples are selected in the same rating and the same duration.Variables of model are selected from three aspects:liquidity,credit risk,and macroeconomic.The paper establishes a multiple regression linear model to find the relationship between the bond spread and the factors.Based on the results of the regression,we find that the bond turnover rate,the difference of full price volatility between ABS and corporate bonds,and the issuance of ABS are the systematic factor of bond spread.The liquidity factors are more effective than credit risk factors or macroeconomic factors.This paper further discusses the dynamic relationship between the bond spread and the difference of turnover rate between ABS and corporate bonds.The method of Vector Autoregressive analysis the two joint endogenous variables,and find the bond spread of different durations and the difference of bond turnover rate all have a significant effect on each other.In addition to being affected by its own lagging variables,the bond spread of different durations also is effected by the change of the difference of bond turnover rate.Correspondingly,the difference of bond turnover rate is also being effected on its own lagging variables and bond spread.This paper also tests the VAR model by the method of Wald-test coefficient restrictions,and tests the stable of VAR by Eigenvalue stability condition checking.Based on the results of VAR,this paper adds the lagging variables of bond spread of different duration as a control factor to establish a new multiple regression linear model.