The Impact Of Treasury Futures Restarting On The Treasury Spot Market Liquidity

The bond market is an integral part of the capital market and plays an important role in the overall economic operation of a country.The bond market is composed of the treasury spot market and the treasury futures market.Among them,the treasury spot market can support the development of the treasury futures market,and the smooth operation of the treasury futures can complement the spot market of treasury bonds,and the two are interdependent as a whole.At this stage,the expansion of China'streasury spot market size has been able to support the operation of the treasury futures market.Moreover,the acceleration of the interest rate marketization process has led to a gradual increase in demand for financial instruments that can circumvent systemic risks.So,September 6,2013 China re-launched a 5-year bond futures contracts,on March 20,2015 China's 10-year bond futures contracts are also started in Chinese financial futures exchange.The restart of China's treasury futures will directly affect the treasury spot market in many ways,one of which cannot be ignored is the impact on the treasury spot market liquidity.Because the liquidity can reflect the development and stability of a financial market,but compared with other developed countries such as the United States,the current treasury spot market liquidity in China is not very ideal.Therefore,this article would like to explore whether the restart of China's treasury futures can further improve the liquidity of the treasury spot market.This paper first describes the concept of treasury futures and the treasury spot market liquidity connotation,measurement dimensions and measurement indicators.Secondly,this paper introduces the reform of the treasury futures and compares the existing treasury futures contracts,and analyzes the liquidity of the treasury spot market.Then,in the empirical part,we use the Eviews software to construct the ARMA-GARCH model and add the dummy variables to analyze the change of the ILLIQ ratio of Chinese treasury index before and after the restart of China's treasury futures.The empirical results show that the restart of China's treasury futures can improve and enhance the liquidity of the treasury spot market,and can stabilize the fluctuation of this market's liquidity.Finally,this paper analyzes the causes of this conclusion and puts forward the policy suggestions according to the conclusion of the article to develop the treasury spot and futures market to raise the market liquidity.