Research On The Pricing Factors Of Municipal Bonds In China

Municipal bonds are bonds that raise funds for local infrastructure construction projects and quasi-public interest projects,with the main body of Municipal platform.In recent years,China's Municipal bonds have developed rapidly and the scale has been continuously expanded,which has provided an important guarantee for the investment and financing needs of local government.But at the same time,the credit risk of municipal bonds is gradually exposed in the process of rapid expansion.The reasonable matching of the pricing of municipal bonds with the actual credit status of the issuing entities has increasingly become a consensus between regulation and the market.This thesis starts from the macro and micro dimensions,and tries to explore the important indicators that affect the pricing of municipal bonds in China.Then this thesis studies the heterogeneity of these indicators on the municipal bond interest rates of different credit levels and different issuing provinces.Based on the panel data of municipal bond issuance from 2010 to 2019,this thesis puts multiple indicators such as municipal bond guarantee,debt rating,financial status of the issuing platform,and economic status of the issuing province into the benchmark OLS model and the grouped OLS model.The credit spreads of municipal bonds are regressed and the main research results are as follows:(1)As an important credit enhancement method for municipal bonds,guarantees can reduce the credit risk of municipal bonds to a certain extent,but the reduction is relatively limited.The reason is that there is a certain government "hidden guarantee" for the issuance of municipal bonds in China;(2)The rating of municipal bonds in China can reflect the credit risk of municipal bonds well,and the credit spreads of municipal bonds with higher credit ratings are generally low;(3)The financial status of China 's municipal platform is a relatively strong indication of the credit spread.The improvement of the profitability and solvency of the municipal platform can significantly reduce credit spreads for issuing municipal bonds;(4)Municipal bonds issued by provinces with higher local fiscal budget revenue(expenditure)or better economic conditions generally have relatively low spread.Based on conclusions above,this thesis proposes corresponding policy recommendations from three dimensions of the municipal bond supervision agency,local government,and municipal platform,which is of significance for the establishment of a reasonable pricing mechanism for the future municipal bond market.