Study Of China's Treasury Yield Curve

This thesis focus on the T-bond yield and answers two questions: how to establish the T-bond yield curve and what is the shape and the rule of the yield curve. Since the research on the term structure of interest rate is still relatively weak in China, it is significative in theory and practice for this thesis choosing such a topic.The models about term structure of interest rate include theoretic models and quantitative models. The theoretic models have much strict hypothesis which makes them more adapt to theoretic research. The quantitative models get data through discount function or insert-value methods which make them adapt to establish yield curve.During establishing yield cure through quantitative models, we must pay more attention to some key factors. The first one is data. Since there are many abnormal tradings and distortion data in bond markets, it needs to adopt some scientific and rational methods to manage the raw data before using it. The other one is key hypothesis of the model. Through demonstration research the author finds it better to divide the yield curve into three parts with 3 and 7 year as the key nodes in spline model, adopt composite weighting in NSS models, and be cautious to choose key term point in Hermit model.This thesis analyzes the difference betweent Hermite model and spline model in establishing yield curve, which shows that the Hermite model is approrite to the inter-bank market while the spline modet fits the stock change much. Since the difference of results is small and the inter-bank market is dominant in Chinese bond markets, the author propose to adopt Hermite model to estable unitive yield curve.The CDC curve is esblished and issued by China Government Securities Depository Trust & Clearing Co. Ltd.,(CDC).The authority and authenticity of the CDC curve make it ideal data for yield analysis.Throught analyzing the CDC cureve we find the T-bond yiled curve uptilting now and always in history. Although this phenomenon can be explained by Expectation Hypothesis, Market Segmentation Theory and Liquidity Preference Theory, the Liquidity Preference Theory is most reasonable after all. Comparing with the yield cure of the western developed countries, the level and shape of the T-bond yield of China is normal. By analyzing the change of the T-bond yield curve during 2002-2008, the author finds that yield spread of the T-bond is positive correlative to the yield itself. The main factors pushing the yield curve include macro economy, liquidity and policy. CPI, 7-day repo rate in the inter-bank and 1-year deposite rate are three reprentive indexes which have important influences on yield curve, with CPI having the most one. In a general way, the T-bond yield will rise when any of the three indexes rise, while the T-bond yield will drop when all of the three indexes drop.