Empirical Research On Forecasting Power Of Chinese Bonds' Interest Rate Term Structure

Interest rate is one of the most important index in modern economy, and it has the directive effect on everyone's daily life, it also affect one country's macro economical working function. Interest rate term structure is the method which research on the information what the interest rate contains, and it is a significant field of modern finance. According to the expectation hypothesis theory of interest rate term structure, the interest rate term structure contains the information about future interest term spread and future inflation rates changing. By using the model and hypothesis which related to interest rate term structure, we can get the rational forecast of bonds'future yield of different kinds and terms. We can also get the effective forecast of some macro economical index, which can be saw as the policies' references to the government.This paper use Chinese Shanghai exchange bonds' market's data, which is from July 2004 to June 2009. By using B-spine function get Chinese interest rate term structure of Chinese bonds'market.Then we do empirical research on these data, analyze the econometrical regressing results, which aim is to make sure and investigate Chinese interest rate term structure's character and the power of forecasting.This paper do systematic research on Chinese interest rate term structure of Chinese bonds'market from both theoretical aspect and empirical aspect, and calculate interest rate's forecasting power on Chinese macro economical index, which hopes to give the useful consultation to government when they need to do some monetary or financial policy.Totally, this paper contains six parts, as follows. The first part is the introduction part, in this part, I give up the background of interest rate term structure and this paper's practical significance. The second part is the theory basis of interest rate term structure. This part introduce the basic concept of interest rate term structure, and some traditional theory of interest. The third part is the current research situation.This part introduce the static estimate and dynamic model of interest rate term structure, and also give the different researches in developed countries and developing countries. The fourth part is using B-spine function fit Chinese bonds market interest rate term structure from July.2004 to June.2009. The fifith part is the empirical research on interest rate term structure. First, this part use spread predict future interest change, then do empirical research on spread predictive power of inflation rate.The sixth part is the conclusion part, this part give the main conclusion and policy advice according to the above research results. The sixth part is conclusion and advice part, I summarize the conclusion of this paper, and give some advice to our government on the development of Chinese bonds'market.This paper may have innovation in the following aspect.First of all, this paper fit Chinese interest rate term structure by Chinese bonds data,through B-spine function method.Second, this paper investigate on Chinese spread's predictive power on future interest rate and inflation rate.This paper's defect is that because of Chinese exchanging bonds'market' inadequacy, the interest spread can only forecast future inflation under some special situation. That is to say, we can only use relationship between interest rate and inflation rate of Chinese real economy on some extent, and which sometimes didn't work.The conclusion of this paper is that, Chinese bonds yields'spread contains future interest information, so we can use proper interest spread to forecast future short interest change situation, and between future yield change and spread there are some stable relationship. In forecasting real economy angle, Chinese interest spread has some kind of power to forecast future inflation rate change, for example, the change between future inflation rate in 12 month and future inflation rate in 1 month could be predicted by interest spread. All in all, this paper justify that Chinese short and long interest spread can predict future interest rate and inflation rate change, so investors and government can get useful information from it, and do some policy to avoid risk. But in the forecasting on real economy, the results is not very good. So, Chinese bonds market need to develop more, and some policy should be taken by our government to prompt its development.