Research On The Factors Influencing The Credit Spread Of Municipal Bond Of China

As a financing form of local government,municipal bonds have played an important role in promoting the urbanization of China and and the scale once showed explosive growth.In order to avoid the local government debt risk caused by the rapid expansion of municipal bonds,the State Council issued document No.43 in September 2014,which for the first time explicitly required the divestiture of the local government financing function of the municipal platform and accelerated the standardization of government debt financing mechanism.Document No.43 has become the top-level design document for local government debt management and set up a clear policy framework for subsequent debt management.In the context of the continuous introduction of relevant control documents and stricter policies,whether the influence of the implicit guarantee of local governments in the pricing of municipal bonds has been weakened,whether the implementation of various policies has achieved the expected results,and how to effectively identify the influencing factors of credit spread of municipal bonds and control debt risk under the new environment is worthy of attention.This paper selects the issuance data about municipal bonds from 2011 to 2020 for regression research.Taking the release of Document No.43 in 2014 as the time dividing point,the paper focus on the influencing factors of credit spread of municipal bonds under the new environment.Starting from the three main participants in the issuance of municipal bonds——the government,the municipal platform and the underwriter,this paper applies the multiple linear regression model,establishes exogenous policy variables and adds cross terms to study the changes of the influence degree after the implementation of the policy.The main conclusions are as follows:(1)The improvement of the local government’s financial situation,the promotion of the solvency of urban investment enterprises,the underwriter being a local enterprise,and the expansion of the scale of the underwriter can significantly reduce the credit spread of municipal bonds.Those municipal bonds underwritten by reputable underwriters tend to have higher credit spread.Among the three factors,local government financial factors have the most significant impact,indicating that the government attribute of municipal bonds in China is obvious,and it is urgent to promote the marketization process of pricing of municipal bonds.(2)The implementation of document No.43 has strengthened the negative effect of the improvement of the solvency of urban investment companies on the credit spread of municipal bonds,and has promoted the marketization of municipal bond pricing to a certain extent.However,after the implementation of the policy,investors paid less attention to the operational capability and profitability of urban investment platforms and the policy implementation is not effective in weakening the impact of local government financial factors and underwriter factors on the credit spread of municipal bonds.(3)In terms of weakening the impact of local government finances on the credit spread of municipal bond,document No.43 has not achieved the desired effect in regions with different degrees of marketization.The policy has enhanced the negative effect of the solvency of urban investment platforms in various regions on the credit spread of municipal bonds,weakened the negative effect of the underwriters in regions with a high degree of marketization on the credit spread due to the nature of local enterprises.Generally,the effect of policy implementation is better in areas with a higher degree of marketization.Based on the research above,this paper proposes corresponding policy suggestions from the level of local government,municipal platform,underwriters and investors,so as to provide reference for reasonable pricing and promoting marketization of urban investment market.