Based On Credit Rating Analyze The Risk Of The City Investment Bond

By Chinese Financial System’s constraints, our local governments in infrastructure is often inadequate. To solve the problem of finance, bond market create a new variety-City Investment Bonds, which is the local government through the allocation of land, equity, rights fees, bonds and other assets, quickly packed out a standard company, supported by financial subsidies when necessary, and then issue bonds as corporate bonds、corporate bonds、medium-term notes and short-term financing bonds, the raise funds will be used to municipal building, public utilities, etc. project. Our first City Investment bond is Shanghai City investment bond by 1992,500 million. With the U.S. subprime crisis broke out, the countries take a proactive fiscal policy, increased infrastructure, especially in livelihood projects, such as Public rental and low-rent housing; on the other hand expand the scale of bonds.But the city investment bond is not Local government bond, because of the different of issuer qualifications、maturity、size and so on, the default risk is different. The city investment company is mainly responsible for land development、transport, their profitability is poor. In 2009 in Yueyang City, its construction investment company马make up two subsidiary companies, and the income of the fictional subsidiary as its main revenue source; There is 07 AnQing City Investment bond fail to pay interest in Interest Payment Date.The rating agencies, As the investor’s "guardian" and the capital market’s "gatekeepers", Fully reveal the risk becomes very critical. However, Chinese bond rating industry started lately、developed slowly、poor independence, some people do not quite trust it. so we select the city investment bonds that issued from 2000 to June 2010, The observation that are the city in which the investment bond issuer declining, from the provincial city expanded to capital cities, to the prefecture-level cities, and even district level; from the east coast line to the second and third tier cities in central and western inland. In addition,the rating of city investment bond is relatively high, Third, the variability of bond rating is poor, "go easy down hard". According to WIND statistics, since 1987, the bond of subject ratings lowered is only 5. During this period the Chinese economy has experienced some economic cycles, this is not normal.Because of The status of credit rating, I became interested in it. I want to know Whether to reference credit rating to buy bonds. While the previous academic research on the risks of local investment and financing platform, the more angles from the bank, and less concerned on the risk of the bond investors, the use of quantitative models is less. This article is based on this point, Reference the method of HePing and JinMeng,do analysis by model.We found through regression models:the credit rating has indeed become the basis for the pricing of bonds, in general, the higher the credit rating the lower the cost of bond issuance. Besides the company ratings and bond rating are having an impact on issuance costs. Based on a rating, the other rating can still provide useful information to investors; due to more targeted, the influence of bond rating on the issuance costs is greater than the company rating. According to the model results, a higher bond rating, issuance costs dropped about 63 basis points; while a higher bond rating, down 15 basis points. That the investors more concerned on the bond rating.