Analysis On The Influence Of Monetary Policy On Bond Liquidity

The bond market is essential to the effect of monetary policy and the establishment of a stable and efficient financial system.And,the liquidity of bond is an vital indicator to measure the maturity of an economy’s bond market.On the one hand,a highly efficient bond market is more suitable for investors to make value investments and move freely in and out of the bond market without being exposed to unexpected liquidity risks.On the other hand,an effective bond market can make a country more flexible and effective in implementing various monetary policies to achieve the desired results.Since China’s bond market is always a capital-driven market,its liquidity can be influenced by the monetary policy.The determinants of bond liquidity include two levels:macro level and micro level.In view of many domestic scholars study the micro-level factors of bond liquidity or monetary policy transmission channel,so this article,starting from the monetary policy,studies the effect of monetary adjustment policy on the liquidity of different types of interest rate bonds.Under the comprehensive consideration,this paper choose three main monetary policy instruments,including the deposit reserve rate,medium-term lending facilities and reverse repurchase operation.Besides,we take the influence factors of the micro level,mainly for the rest of the time limit and bond yields as control variables into consideration.In this paper,the principal component analysis method is used to synthesize the indicators affecting China’s bond liquidity by comprehensively considering the indicators of different dimensions of bond liquidity.Secondly,the event analysis method is used to preliminarily explore how the monetary policy affects the liquidity of interest rate bond.Finally,we use multiple regression method to analyze the effect of monetary policy on bond liquidity.The main conclusions are as follows:(1)loose monetary policies,such as the reduction of the deposit reserve ratio,MLF and reverse repurchase,will significantly increase the liquidity of national bonds and policy-based financial bonds,but mediumterm lending facility operation has no significant effect on local government bonds.(2)Tighter monetary policies,such as the withdrawal of medium-term lending facilities,will reduce the liquidity of national debt,but the decline is smaller than the increase in liquidity caused by the release of medium-term lending facilities,indicating that the release and withdrawal of medium-term lending facilities have asymmetric effects on the liquidity of national bond.(3)In the robustness test,the liquidity of interest rate bonds decreases with the increase of DR007.