Empirical Research On Term Structure Of Interest Rate Of China's Treasury Bonds

With the development of china bonds market and the reform of interest rates marketization, it is necessary and important to study the interest rate term structure of china's treasury bonds, especially for the static and dynamic anaysis of yield curve. A reasonable static model is developed to study the yield curve of china bonds and the variation of interest rates is also analyzed by using principal components analysis method, as summarized in the following.Cubic polynomial model can accurately fit the yield curve of Chinese bond. The yield curve is up sloping, which accorded with the pure expectation theory and liquidity preference theory. The yield rates of long term bonds are higher than those of short term bonds, which accorded with the pure expectation theory.The interest rate term structure of china's treasury bonds is not very reasonable at present. The circulation and scale of short term and exceed long term government bonds is small, while the proportion of medium term bonds is very high.The yield rates of medium term bonds, from 2.5% to 3.5%, is on the low side, which indicated the cost of society capital is low, and the interest risk of bonds is high. It is also a reflection of underdeveloped bonds market and distortion of bonds price.The variety of pricinal rates is high correlative and their fluctuant range is different. The dynamic character of yield rates culve of government bonds can be explained by three princinal components. Therefore, the integrated movement of the three princinal components can describe the trend of yield rates culve of government bonds.The variety form of interest rates is very complex according to the princinal component analysis method. The level shift component can not adequately explain the variety of interest rates. In addition, choosing some basic data of interest rates is very important to analyze the princinal component of government bonds. It is very important to choose the time range, interval time of interest rate term and princinal rates, and the change of any ingredient can induce the variety of princinal component.