The Analysis On Pricing And Spread Of Medium-Term Notes In China

The development of Medium-term notes is still in the stage of infancy in our country, and it is in favor of enterprises and investors for its unique advantage. Its scale of issuance and varieties have been growing, it has been the major fixed-income product in our country. However, there also exist some problems, especially on pricing. On the beginning, the pricing is considered as serious convergence and the market spread between the primary market and the secondary market is too large, which easily leads to the behavior of "playing the new debt". So that the market trader association between the banks of China has made reform on the issuance and pricing of medium-term notes and call for that the release interest rate should be closer to the level in the secondary market, and without large deviation. At the same time, they require that the interest rate of issuance of the medium-term notes can not exceed ten basis points of the lever in the secondary market. The spread between the primary market and the secondary market has began to narrow, basically below 20 basis points, even the interest rate is inverted sometimes. The style of pricing which is near to administrative intervention is clearly not in line with the market needs of economic development, and disobeys the principle of "the issuance interest rate, issuance price and flat rate of debt financing instrument will be determined on market style. This will be bound to discourage issuers and investors with such long-term development, which is not conducive to the development of capital market in our country. The purpose of this article is to help investors better understand and quantify the risks inherent in the medium-term notes products through the research on the pricing of the medium-term notes.The medium-term notes has been emerged for only one year in our country, and then the research of domestic scholars still remain in the theoretical discussion stage. While the research of credence product pricing in foreign countries usually use structured and simple models, which requires the support of sophisticated fixed-income market and large data of issuance and default. However, the market of medium-term notes just only has started in our country, we can not copy the pricing style in foreign country as the lack of corresponding data. Then, what decides the pricing of the medium-term notes in our country? what factors affect the pricing? We find that the nominal interest rate of the medium-term notes has a high degree of relevance with the bond yields in the corresponding time period through research. So the article considers the bond yield in the corresponding time period as the benchmark interest rate, makes analysis on the issuance spreads of the medium-term notes and the impact factor of spread, collects large data of issuance and trading in the secondary market and indicators of corporate finance and corporate nature which affect the pricing of medium-term notes, takes the quantized analysis of the pricing of medium-term notes and builds the pricing model of medium-term notes. And we use the pricing model to simulate to price on the medium-term notes which is newly issued, and compare the simulation results to the actual results. The final results show that the model has some guidance on the pricing of the medium-term notes.