The Study On The Integration Of National Debt Circulation Market In Institutional Change

The practice of developed bond markets proves that the development of national debt market not only depends on issue market but also depends on circulation market. If there is no developed circulation market, the effective and market-oriented issue market can't be established and the national debt market can't function effectively. As an essential circulation place for national debt, the secondary market of China' s national debt is playing a more important role in the whole national debt market and financial market. But its development has been hindered by market partition. The two national debt markets, one is inter-bank and the other is the exchange bond market, each of which has its own transaction principals, transaction mechanisms and market regulator. The foresaid three issues create the segment of the two markets. The two markets can't have coordinated development, and sometimes even develop in the opposite direction, which seriously hamper the growth of a healthy national debt market. The segment of market reduces national debt market's liquidity and increases national debt's financing cost. At the same time, it also weakens the performance effect of central bank' s open market operation. In order to accelerate the integration of our national debt market, some departments take a series of action such as enlarging main participation types of the inter-bank bond market and adding variety of cross market's national debt. These policies and actions play an important role on the integration of national debt markets. But after these policies are published, could the segment situation be changed evidently; what are these policies' effect; what factor influents the real effect of these policies and how to accelerate the integration of these bond markets? The research of these problems plays a great important role on finding out the condition of our national bond's circulation market. With the impulse of trying to resolve these problems, comes out the original motivation of writing this thesis.This paper reviews the history of our national bond's circulation market. With the institution analytical method, this paper analyzes the formation and merging process of the segment of the national debt market. On basis of this, this paper uses co-integration test, Granger causality test, impulse response function and variable decomposition to analyze co-integration relation and short-run dynamic relationship between inter-bank national debt market and exchange national debt market from 2003 to 2008. Considering that our national bond market is in the process of continuous development and merging situation, different characteristics appear in different period, this article divides the full sample into three sub-periods. The results of EG co-integration test and Granger test suggest that the interdependence between the inter-bank bond market and exchange bond market is increasing and the integration trend is more obvious in the third sub-period. And short-run dynamic relationship suggests that the inter-bank bond market has more effect on exchange bond market, after the rapid development of inter-bank market. At the end of this paper, relevant policy suggestions are given. According to the situation of our national debt market, we put forward corresponding suggestions from four aspects: transaction participants, depository trust and settlement system, supervision system and trading mechanism.