The Determinants Analysis Of MTN Issue Spreads In Our Country

In April2008, the People’s Bank of China promulgated the "non-financial enterprises of the inter-bank bond market debt financing tool management approach "and NAFMII issued a series of "medium-term notes business guidelines" documents, which marked the emergence of medium-term notes in our country. After nearly four years, the medium-term notes have made considerable progress in the distribution system, market scale, and investors in the main areas. It plays an increasingly important role in corporate finance window. By December31,2011,843enterprise has issued a total of￥2.08trillion medium-term notes in the inter-bank market, which scale exceeded the issuance of enterprise bond and corporate bond.As the advent of the medium-term notes are in line with the current domestic financial market and business development needs, it expanded to the scale in such a short period of time. The note has been introduced on a wide range of issuers, investors and other parties to the main, and also reflects the strong demand of the market for medium-term notes. The medium-term notes also provide enterprises with a range of between short-and long-term interim financing channels, which fill in the blank of mid-term debt financing varieties in China.This paper aims to analyze the main factors to affect the credit risk of the medium-term notes by drawing on research methods in the literature of other credit bond credit spreads. And the analysis helps to promote the market development of the medium-term notes.Medium-term notes is not a long time to come out in the country, and the lack of historical default data leads to the short of Empirical research. Domestic scholars examine the relationship between bond credit spreads and its influencing factors mostly from the time series data, such studies lack the main issue between the individual difference analysis.In this paper, we used cross-sectional data of medium-term notes at issuing point from April2008to December2011and selected variable from macro factors, issuing structure factors, financial factors and industry factors in order to find the determinants which contribute a lot for the credit spread.By constructing a regression model to test, we can draw some meaningful conclusions:In macro factors, deposit reserve ratio had a strong explanatory power on credit spread, while CPI is also important. In issuing structure factors, Issuer credit rating and credit spread show negative correlation, which means the higher the credit rating, the smaller the credit spreads. In financial factors, The indicator of total asset and credit spread show negative correlation, but most financial indicators did not show any correlation, especially some indicators’(e.g. asset-liability ratio, ROE and ROA.) partial effect toward credit spread of medium-term notes contrary to our expectations. Industry factors had no impact on credit spread. Finally, the article made a number of policy recommendations on the basis of the empirical results.After merited from the related research methods about bonds credit risk factors, we improved our method mainly from the following three aspects:First, we take the issuance spread of the medium-term notes as our research object, and it is innovative and practical. Second, we selected research samples since its advent. Third, some variables we introduced in the paper are innovations. Third, some variables we introduced in the paper are innovations.As we cannot get access to the trading data of medium-term notes in the secondary market, this paper does not study the influence factors of credit spread in the secondary market. In the future, we can expand the scope of our study, and constantly improve the system of factors that influence the medium-term notes of credit spreads.