An Empirical Study On The Co-movement Relationship Between Onshore And Offshore RMB Bond Market

With the orderly opening of Chinese capital account and the advancement of the internationalization of the RMB,offshore RMB bond market emerges and ever grows and develops.In recent years,the pace of the inter-bank bond market opening to the outside is greatly accelerated,resulting the co-movement relationship between the onshore and offshore bond markets is strengthened.In the background of RMB being included in SDR and the implementation of the Belt and Road Initiative,the problem of the interaction between the two markets is increasingly subject to market concerns.Therefore,it is of great theoretical and practical significance to study the subject.This paper use Granger causality test,bivariate BEKK model,DCC model as well as extended EGARCH model to study the Co-movement relationship and its influencing factors of domestic and overseas RMB bonds markets.There are several implications for the empirical results: Firstly,in terms of RMB government bonds,only onshore market has mean spillover effect on the offshore market,but there is mutual volatility spillover effect between the two markets.Secondly,in terms of RMB financial bonds,there is no significant mean spillover effects between onshore and offshore market,but exists bidirectional volatility spillover effect among them.Thirdly,their correlation is time-varying.Fourthly,the degree of opening to the outside of onshore bond market could enhance the correlation of the two markets,but reduce its fluctuation as well.In addition,interest rate spreads between domestic and overseas being widened,RMB exchange rate appreciation expectations and RMB being included in SDR all can improve the correlation,but could add to volatility of correlation at the same time.According to the research conclusions,several policy recommendations are proposed.For example,we should further expand the opening of the onshore market,develop the offshore RMB bond market,improve the mechanism of interest rate and RMB exchange marketization,improve coordination mechanism of financial supervision as well as seize the important opportunities period of RMB being included in SDR and the implementation of the Belt and Road Initiative.