Predict Bond Market Trend By Macro-economy Advance Index

In this paper, it mainly describes development of China bond market, and then describes its importance and situation now. Through further study the relationship between historical bond index and macroeconomic indicators, this paper builds a regression model to forecast the trend of bond index in order to guide investment in the future.The first step of this study is to analyze the main risks of bond market, combined with real risks of China bond market to sum up the core risk factors of this paper, which are interest risk and liquidity risk.The second step is to compare the meaning of various indices in the bond market, combined with the risk factors to select national debt wealth index as the research goal. Then, based on the classical macroeconomic theory, this paper chooses eight most important leading indicators from various macroeconomic leading indicators, such as CPI, industrial added value, difference between saving and loan in financial institutions.The third step, this paper builds a regression model, in which it defines national debt wealth index as dependent variable, eight macro-economic leading indicators as independent variables. In order to get optimal prediction models, this paper adds lagged variables for independent variables and makes further selection. Then this paper tests the usefulness of this prediction model.Though comparing the difference on the real index of bond market and the predicted value of this model from June to August, considering the real change of the market, this paper try to analysis the causes of errors and the limitation of this prediction model.Finally, this paper analyzes a simulation case of investment guided by this prediction model.