Research On The Effect Of Local Governments Implicit Guarantee On The Credit Spreads Of Urban Construction Investment Bonds

Urban investment bonds issued by local government financing platform in Exchange and Interbank Market are a kind of bonds with Chinese characteristics,which are arising from the restriction of China's legal and financial system.Since the birth of urban investment bonds,the implicit guarantee of local government,that is,local government provides final guarantee for the normal payment of urban investment bonds with its own financial funds without explicit provisions of the law,has been widely existing in the investment logic of the urban investment bond market.However,with the end of local government debt replacement,the tightening of local government debt management and the increasing marketization of China's bond system,exploring the influence of implicit guarantee on credit spreads of urban investment bonds is beneficial to local governments and market investors.Firstly,the paper the paper elaborates the background and development stage of urban investment bonds in China,which shows that urban investment bonds are one of the important ways of financing for local governments in China.It describes the market situation of credit spreads of urban investment bonds in China,and intuitively reflects the impact of local government debt management policies on credit spreads of urban investment bonds.Secondly,the paper combs the existing research results,analyses the mechanism of the influence of local government implicit guarantee on the credit spreads of urban investment bonds before and after Article 43 in detail,and introduces the path of the platform's position acting on the credit spreads through willingness.Based on this,the research object of this paper is divided into new and old city investment bonds,which are still in existence until 30 June 2018.After determining the agent variables of local government implicit guarantee and controlling the factors of bond's own characteristics and financing platform's own operation and financial factors,the implicit guarantee is empirically tested by principal component regression analysis before and after Article 43 introduction.The empirical results show that:firstly,under the background of intensive regulation,the impact of implicit guarantee on credit spreads still exists,but the impact on investment bonds in old and new urban construction investment bond is different.Secondly,in the policy environment of standardizing platform development,compared with the operational financing platform,it is found that implicit guarantee has a greater impact on the credit spreads of bonds issued by investment platforms.Based on theoretical and empirical analysis,the paper holds that local governments should promote the substantive divestiture of implicit guarantee and platform debt,avoid interfering with market choices such as default of urban investment debt;accelerate the process of market-oriented operation of financing platform and enhance the solvency of platform itself.And for investors,change the focus of credit analysis,pay attention to the basic aspects of platform's own operating characteristics,and abandon the implicit burden of local governments;and the focus of investment can be focused on the city investment bonds with strong public welfare.