The Effectiveness Analysis Of The Treasury Yield Curve In China

The fast development of China bond market boosts the research of bond. The most important issue of security markets is the return-risk relation and the return-risk relation of bonds is reflected by the yield curve that describes the relation between yield to maturity (return) and years to maturity (risk), so yield curve is an important analytical tool which serves as the basis of analysis of the trend of interest rate and bond Pricing. As the foundation of bonds investment, yield curve can be used to calculate the bid rate in the first market, select bonds and predict the open quotation price in the secondary market. Meanwhile it can serve as reference for government to issue bonds, supervise bonds, implement monetary policy and adjust interest rate.The third Plenary Session of eighteen first proposed the "keep treasury yield curve reflects the market supply and demand effective," embodies the highest political level wants to develop and improve the financial markets, including the bond market’s attention. As a pricing benchmark in financial markets, treasury yield is not only a benchmark interest rate of market, but also an important tool for macro-control. Central Securities Depository Trust&Clearing Corporation started to compile and publish our Treasury yield curve from1999, the curve data source is complete and accurate, and it is distortion of data for a reasonable deal, with market participants widely recognized authority, it can be said, the yield curve of China bond is the ideal object of our analysis. Though the treasury yield curve itself is complete, accurate, it cannot explain our current bond market is an efficient market, and it cannot explain the treasury yield curve is an effective curve. Therefore, with the rapid development of China’s financial markets now, our country must investigate the effectiveness of the treasury yield curve urgently.This paper studied the validity of the Treasury yield curve by setting the criterion of it. The whole paper is divided into six parts. The first part is an introduction, including research background, significance of the topic, relevant literature review, the paper frame structure, innovation and deficiency. The second part includes the theory of the yield to maturity and the treasury yield curve. The third part is the criterion of the validity of the Treasury yield curve, included both system and conduction effects. The fourth part is the empirical test of the effectiveness of the Treasury yield curve, which is based on the third part. The fifth part is the reason analysis, qualitative analysis of the main reasons for the invalidity of the bond market and the Treasury yield curve, included seven respects. The last part is the policy recommendations section, included enriching trading body types, balancing the interest rate maturity distribution, reforming bond issuance mechanism, establishing a unified interconnected bond market, improving the market maker system, promoting sound development of Treasury bond futures market, enhancing secondary market liquidity, accelerating the process of marketization of interest rates and enhancing the credibility of the Treasury yield curve.