| Bond circulation markets usually include over-the-counter market and the exchange market. Through30years of development, China’s bond market has formed a unified layered market system, including the inter-bank market, the exchange market and commercial bank counter market. Among the three sub-markets, the inter-bank market faced to institutional investors is the main bond trading place, and in recent years bond depository and transactions in the inter-bank market account for about90%of the entire market.Due to some historical reasons, the inter-bank bond market and exchange bond market are still fragmented to a considerable extent. The two markets target at different groups of investors, implement the different trading mechanisms, have different bond products and trading tools, and the bonds in the two markets are hosted in different custodian and clearing institutions. The two markets are supervised by several regulatory institutions. This market segmentation and the differences of operating mechanism make the quality of the inter-bank market and exchange market different.This paper focuses on the liquidity, volatility and price relationships of two bond markets. Using different measures and VAR model, the paper makes empirical analysis of our bond market data, and compares the exchange bond market and inter-bank bond market in the market quality differences comprehensively. The paper reached the following conclusions. The liquidity of inter-bank market is better than that of the exchange market. For government bonds, the volatility of exchange market is higher; for corporate bonds, the volatility of inter-bank market is slightly higher. The yield of exchange market is usually higher than that of inter-bank market. The yields of the two markets influence each other, and the price of exchange markets guides the price of inter-bank market more. On this basis, the paper makes policy recommendations about to establish a more efficient, unified bond market in China. |
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