Analysis On Changes And Factors Of Credit Spreads In Chinese Interbank Enterprise Bond Market

Enterprise bond is issued by enterprises in accordance with legal procedures in the interbank bond market, they promise to pay interest according to certain interest rate and repay par value on each payment date. Credit spread can be defined as the difference between enterprise bond yield and government bond yield that have the same remaining maturity. The enterprise bond yield contains both information as financial status, operating condition, credit qualification and information on macroeconomic changes. Government bond yield curve indicates changes of factors on inflation, economic growth and monetary policy. Credit spread is not only influenced by micro factors of the enterprise, also is influenced by macro economic factors such as CPI, the slope of interest rate term structure. There are six parts in this paper:First, we overviewed the background and the significance of research; briefly introduce traditional theory of credit spread analysis:structural model, contracted model, credit spread decomposition theory and empirical regression method; briefly introduced research situation of related theory and methods, based on related foreign and domestic literature; we also point out the innovations and shortcomings of this paper. Secondly, we briefly outlined current situation and problems needed to solve of the interbank enterprise bond market. Third, we analysis inter link between interbank credit bond market and economic cycle. We explored the effect of different fiscal policy and monetary policy on bond market; by referring to the Merrill Lynch investment clock, we proposed the applicable investment strategy on choosing rational industry department, reasonable credit rating, and suitable term structure in different states of economic operation; we also found that changes in the credit spread showed cycling fluctuation feature. Fourth, we overviewed macro factors, micro factors and other factors that had effects on credit spread; however, analysis on the macro economic factors was the most important part. Fifth, econometric analysis. We chose medium term notes (MTN) as our sample bonds; the sample interval was from May2008to March2012. The dependent variables were credit spreads of different credit ratings, different maturities, the explanatory variables are inflation rates (CPI), interest rate term structure slope, returns on stock market, short term risk-free rate and the MTN market liquidity. Sixth, conclusion and prospect. We summed up six valuable results and proposed some recommendations on doing research in the future.