The Pricing Of Local Government Bond Offering In China

In recent years,with the promotion of the Ministry of Finance,the scale of issuance for local government bonds in China has expanded rapidly,and the local government bond market has developed rapidly.As of the end of June 2018,the scale of local government bonds was 16.65 trillion yuan and accounted for 22.88%to the bond market.Local government bonds have become the largest bond varieties in China bond market.At present,local government bonds have become the most important financing channel for local government debt.The issuance of local government bonds is conducive to improving the government's financing system,mitigating local government debt risks,and implementing national and local fiscal policies.As the largest share of China bond market,local government bonds have an important impact on market participation.Due to the imperfect domestic local government bond issuance system,there are certain intervention problems,the issue pricing interest rate is low,resulting in poor liquidity in the secondary market,low market acceptance,and difficulty in issuing.The pricing of local government bonds issuance has become a core issue.Promoting the marketization of issuance pricing,improving the mechanism of issuance pricing,and playing a decisive role in the bond issuance has gradually become a consensus.Based on the above research background,this paper takes the local government bonds issued since 2015 as the research object,and adopts the classic credit spreads model to study the formation and pricing mechanism of the issuing price.This paper analyzes the main factors affecting the spread of local government bond issuance by studying the spreads of local government bond issuance,and then studies the formation mechanism of issuing price.Due to the bond coupon effect,this paper studies the degree of deviation between the issuing price and the secondary market price,so as to analyze the rationality of local government bond issuing price.Based on the theory of credit spreads and the theory of central and local fiscal relations,this paper constructs and optimizes the pricing model of local government bond issuance by introducing administrative intervention factors.By introducing the underpricing model,this paper studies the degree of deviation of the issuing price and analyzes the difference between the issuing price and the secondary market price is to verify the rationality of local government bond pricing.The study finds that government intervention and government credit constraints affect the important factors of local government bond issuance spread,and the evolution of the issuance system and market is an important driving force for the market-based pricing of local government bonds.Therefore,this paper suggests that government intervention should be strictly controlled to promote market-based pricing.At the same time,local government bond issuing price's reference standards should be established,fully refer to the secondary market pricing,promote the reform of the issuance system,improve the secondary market infrastructure,and develop the sub-sovereign bond market,thereby promoting the market-based pricing of local government bonds.The innovations of this paper mainly have the following three aspects:(1)By constructing and optimizing the credit spreads model of local government bond issuing price,the first introduction of administrative intervention factors provides a new explanation for local government bond issuing price;(2)Through the credit spreads and underpricing model,the deviation of local government bond issuance pricing and secondary market pricing is studied for the first time,which shows the marketization process of local government bond issuance pricing;(3)Based on public debt theory,based on the credit spreads and underpricing model studies the pricing of local government bond issuance in China,and enriches the public debt theory to a certain extent.