Empirical Study On Influencing Factors Of City Construction Investment Bonds’ Spreads

City Construction Investment Bonds are generally issued by local government or the companies controlled by the SASAC, which will use the funds raised to do infrastructure construction and other public welfare program. Its purpose is very similar to municipal bond of the western developed country. The biggest difference between the two kinds of bonds is that City Construction Investment Bonds are not issued by the local government directly and don’t have the preferential tax policy. It is also called quasi-municipal bonds because of its Chinese characteristics.It is important to study on the City Construction Investment Bonds for several reasons. Firstly, it has played very important role in infrastructure construction and analyzing the development of macro economy of our country. Secondly, there has been raised much risk that relevant government departments should pay great attention during the rapid development progress of City Construction Investment Bonds. For example, there are many scandals in terms of corruption and rent seeking during the issuing progress. At last, people all hope that we can complete City Construction Investment Bonds to adapt the Chinese national condition. Therefore, it is necessary to deeply discuss the development of City Construction Investment Bonds.This thesis will use multiple regression models to analyze the micro-influencing and macro-influencing factors of the bonds’ interest margin. The first model is to study the micro-influencing factors of the bonds’ interest margin, using cross section data. The second model is the macro one, which uses the panel data. The main conclusions through the two regression results are as follows. First, the market investors are overwhelmingly dependent on the credit rating results. Second, the structure and the term structure of City Construction Investment Bonds become imbalance. Third, the investors have little risk awareness and overrate the implicit guarantee offered by government. Finally, there is a negative correlation between the bonds’ interest margin and the expectations of inflation.At the end, the author has offered some relevant policy suggestions will be provided according to empirical analysis results. First of all, PPP model may become an important pushing hands for the future municipal infrastructure construction, in the over-all situation of stable economic growth and rich social capital stock. Second, because of local government’s heavy debt obligation, PPP model should match Project Revenue Bonds, which can be regarded as an important method in the transformation of City Construction Investment Bonds, and can be used to provide financial support for municipal construction and commonwealth projects in the future. Third, we should optimize the bond structure and promote the diversification of bonds market diversification. At last, local government may have the rights to issue bonds to replace the City Construction Investment Bonds. Currently, only provincial government is allowed to issue bonds domestically. However, municipal governments may be provided more right to issue bonds under tight supervision.