A Study On The Factors Affecting The Credit Spread Of Corporate Credit Of Chinese Stock Exchange

In2012, the bond market has experienced fast development and the risk of default is looming. Credit spreads, which is the difference between the credit bond yields and risk-free bond yields, is the best indicator to measure the relative risk of the debentures.This paper discusses the impact factors of credit spreads of corporation bond from two levels:the index level and the individual bonds level. At the index level, we analysis the impact factors of credit spreads of four different credit rates and four different terms. At the level of individual bonds, we analysis the impact factors of162unexpired corporate bonds issued between2007and2011. Through the approaches of time series analysis and panel data analysis, we find that the interest rate is an important factor affecting the credit spreads. Flight-to-quality effect exists between the bond market and the stock market, which means when the stock index volatility rises, the credit spreads of corporate bonds decline. And investors are concerned about the companies’ value. The greater the volatility of the values and liabilities to assets ratios, the greater the credit spreads. In addition, considering there is no default in China’s bond market yet, investors always chase lower-rated high-yield bonds rather than to balance the risk and return and make a portfolio, thus high turnover rate does not necessarily mean high quality in Chinese market.We suggest that the government will not pay debt for corporates which are facing default. Distortion state of the zero default in Chinese bond market should be changed; Gradually eliminate the segmentation between interbank market and exchange bond market and allow more banking institutions trade in the exchange bond market, which will greatly improve the activity of the exchange bond market.