The Analysis Of The Influence Factors Of City Construction Investment Bonds’ Issuance Spreads

Since tax system reform on January1,1994,China imposed on all provinces, autonomous regions, municipalities, and cities with tax management system.Despite tax reform effectively promoting the initiative of local government and To a certain extent promoted the growth of local economies and financial income,but as the promotion of economic reform、development of public finance system,especially the acceleration of the process of urbanization and other various problems highlighted,local government’s commitment to promote local economic development and the expansion of urban infrastructure construction as well as increasingly in the growing.However,if budget funding alone for infrastructure construction and financial funds of local governments,the funds is far from enough.Meanwhile,Since tax system reform central and local distribution of responsibilities and financial power took on a new phenomenon:local government beard more responsibilities but less financial power.In addition the transfer payment system is not yet perfect, local government funding gap continued to increase.Right now,local government is not allowed to issue bond directly.To resolve the contradiction between demand and supply of funds issues, two solutions arises in the reality operation:the first one is central government issued bonds and then lending to local;The second solution is borrowing from banks or issuing bonds through the enterprises belonging to the local government.This enterprises is called city construction investment company and the bond is called city construction investment bond.City construction investment bond is also called Chinese municipal bond.it has local governments’ tax revenue or project benefit as a guarantee and its credit rating after bond’s credit rating and higher than the general corporate bond.So City construction investment bond is safe relatively and considered to be China’s"Silver bond". City construction investment bond have both characteristics of municipal bonds and ordinary corporate bonds,so it’s risk are particularly unique.As investors,the most issues of concern is city construction investment bond’s proceeds.In China,City construction investment bond uses its par value as the issue price,so issued in discount or premium is not existed.Therefore city construction investment bond’s earnings mainly reflected in the it’s coupon rate.Through the observation of city construction investment bond’s raise specification,we found that the vast majority of city construction investment bond’s interest rate is consisted of benchmark interest rates and spreads and the benchmark interest rates is Shibor interest rate.Meanwhile,the interest spread is vary from different bonds.City construction investment bond’s issuance spreads is the research object of this article and paper analyzes the factors that influence the spreads,including macro factors、micro factors and factors in it’s designing process.This article consists of seven sections and mainly focuses on the analysis of the factors that influence the spreads and then trying to establish a model of factors affecting city construction investment bond issuance spreads.The first three parts of this paper,it elaborate the research background、research significance、literature review、research methods and so on.In the fourth part,paper described the concept,characters and present conditions of city construction investment companies and bond.In the fifth part,it makes a detail analysis of city construction investment bond’s from the perspective of macro and micro factors.Macro-factors including GDP, money supply, consumer price index, corporate bonds, the risk-free interest rate and so on.As Micro-factors,paper analyses two aspects of city construction investment bond’s issuers and bond’s own design analysis,including issue size,issue period and types of interest rates of bond and credit rating, assets and related financial data of issuers.The sixth part is the heart of this paper.In this part, it uses principal component analysis and stepwise regression analysis method to establish a model of factors affecting city construction investment bond issuance spreads.Through analysis and comparison on these two models,we find that consumer price index in macro-factors credit rating, asset of issuer and issue size and period of bond have the most significant impact on bond spreads.Then use the resulting model to predict city construction investment bond spreads and the effect is good. At last,paper makes a summary of this full text and points out some shortcomings.