The Analysis Of Quasi-Municipal Bonds’ Issuing Spread Based On The Perspective Of Credit Rating Of Local Government

In recent years, with the rapid development of urbanization in our country and the infrastructure construction scale expansion, the quantity and scale of the quasi- municipal bonds which is the most important financing channel of the local governments are higher than ever. But in our current fiscal and taxation system, the fiscal power and administrative responsibilities of the local governments are not equal, the situation of the fiscal deficit of the local governments is rather serious, the huge debts make a thing that the debt risk of the local governments is about to be out of control. In this case, the default risk of the quasi- municipal bonds is gradually exposed. Due to the local government’s invisible guarantee, financial subsidies and preferential tax policies, the pricing of the quasi- municipal bonds is so different from the general credit bonds and it is not sensitive to the market interest rate. As a result, its issuing cost is much higher which leads to the risk of repayment of principal and interest.Considering the closed relationship between the pricing of quasi-bonds and the local government, this paper will study the issuing spread of quasi-bonds in the perspective of credit rating of the local government which is from the credit rating agencies. When evaluating the comprehensive strength and credit of the local government, rating agencies are doing this based on economic development, fiscal revenue and expenditure. So this paper chose the GDP, deposit and government revenues and other indicators as explanatory variables to build model to analyze its impact on the issuing spread of quasi- municipal bonds. The empirical result shows that, GDP, deposit, government revenues and fiscal self-sufficiency rate all have a significant impact on the issuing spread of quasi- municipal bonds. The bigger local GDP are, the smaller the issuing spread will be, in addition, the deposit which measures the degree of financial resource of the local government and the government revenues and fiscal self- sufficiency rate that measure fiscal strength and the ability to pay off debts of the local government all have negatively affection on the issuing spread of quasi- municipal bonds. At the same time, this paper finds that some indictors which are always used to measure operat ing level of urban construction &investment corporation such as ROE, leverage all have no significant impact on the issuing spread of quasi- municipal bonds, this also shows that quasi- municipal bonds have great dependence on the local economical strength and financial revenue and expenditure. At last, given the result of this paper, this paper gives some policy suggestions on the development and specification transformation of the quasi- municipal bonds.