Study On RMB Interest Rate Swap Spread Characteristics And Determinants

Driven by negative interest rate swap （IRS） spreads in U.S. market, the paper tries todig into the interest rate swap spread. From the rich foreign researches, we canconclude the general determinants of IRS spread and attempt to find out the possibleexplanation for U.S. anomaly. After that, more attention is paid to Chinese swapmarket, looking into two main kinds of RMB IRS （based on FR007and Shibor₃M）to see what their characteristics are in Chinese market and whether there showsanomaly also. Then empirical study is done to check our guess. Here vector autoregression model is adopted and then impulse response and variance decompositionhelp to examine the RMB IRS spread determinants and their contribution. Resultsshow that for both Shibor₃M and FR007based swap spreads, except for spread itself,the most influential factors are liquidity risk and interest rate term structure slope.Besides, different factors matter for different maturities and referring rates.