Research On The Yield Curve Of The Chinese Treasury Bond

At Dec 1st 2006, China's finance service industry opened its door due to the promises of the entry of WTO. But take banks as a representative of the finance industry, we could find the truth that domestic finance institutions have little competition capacity, lots of bad debts and hidden risks, and the whole industry faces lots of pressure. Faced the pressure, China ultimately takes measures to reform the system of banks, exchange rate, and interest rates. At Jul 2005, China's central bank announced that China would put floating exchange rate into practice, which based on market supplies and demands. In past several years, China's bond market has get far-reaching improvements, and products innovations emerge in endlessly. The research of term structure of interest rates can give the pricing foundation of the capital market, and promote bond market's development, enrich central bank's control instruments, advance finance institutions' abilities of risk control, and at last make the financial system more steady.Treasury bond market is a significant component and the base of the bond market. And the yield of treasury bond as well as the shape of yield curve bears an important meaning to the treasury bond market and even the whole financial market. This thesis is to study the yield curve upon the basis theories of term structure.There are five chapters and six parts of this thesis. Followings are the summary:The preface of the thesis illustrates the great theoretical value and practical significance in the study and then brings forward the general outline and the problems to be solved.Then in chapter one, the term structure of interest rate is analyzed by qualitative method on the characters of yield curve,and analyze the reason why the government yield curve can take the role of benchmark rate. Then the thesis introduces some classical theory of the interest rate term structure, and I analyze some factors that affect the government bond yield and the shape of government bond yield curve.In chapter two, I establish calculation methods of various yields and emphasize the basic characteristics of the government yield curve. The chapter draws up nine days'government yield curves and then analyzes the policy information of the curves.In chapter three, this chapter reviews the theoretical achievements of the term structure of interest rate at home and abroad, and then focuses on how to obtain a yield curve that can accurately reflect the market. Different calculations of yield effect the shape of the yield curve, yield curve applying internal yield to maturity may be misleading. A reasonable selection of yield calculation is the spot rate. We use cubic polynomial functions to fit the term structure of interest rate of Chinese government bond .We give simple but scientific way to obtain the yield curve of spot rates with the belief that this method will display its superiority with the expansion of china's bond market.In chapter four, we introduce the relation between yield curve and monetary policy and show how the central bank does to effect the expectation of the people. In chapter five, the chapter puts forward the government bond yield curve is the indictor of market. It reveals quite a lot in respects of bond rates, price determining for bond issuance, macroeconomic control. Because the government bond yield is not benchmark rate of capital market together with the deficiency of China's bond market, the government yield curve is not the efficient indictor of market; it is not equilibrium and integral. The chapter provides useful references for strengthening the construction of the government bond market and look into policy choices in achieving reasonable and creditable government yield curve that can accurately reflect the market. In the foundation of the analysis, this paper finally suggests systematic reform policies for the development of Chinese treasury bond market.