Research On The Influence Of Monetary Policy On The Credit Spread Of City Investment Bonds

In the reform of China's fiscal system in 1994,the proportion of local government fiscal revenue in the national total fiscal revenue decreased.With the accelerating urbanization process,local governments need a lot of infrastructure construction,and therefore face a severe financial gap.In order to solve the problem of funding gap,local governments set up city investment corporation.City investment bonds are bonds issued by financing platforms established by local governments.At the beginning,the issuance scale was very small,only a few hundred million yuan.In 2009,the state invested 4 trillion yuan to stimulate the economy,and urban investment and bonds saw an explosive growth.The issuance scale of urban investment and bonds increased from 200 billion yuan in 2009 to 2.4 trillion yuan by the end of 2018.By the end of 2018,the size and stock of the urban investment bond market accounted for 27.26% of the credit bonds,and urban investment bond took an increasingly large share in the bond market and its position became increasingly important.Since the second half of 2008,the central bank has frequently used two monetary policy tools,namely the statutory reserve ratio and interest rate policy,to regulate the macro-economy.From August 2008 to January 2019,the central bank adjusted the reserve ratio for 29 times and the benchmark deposit and lending rates for 17 times.On November 22,2014,the central bank announced to cut the benchmark interest rates of deposit and lending,and the yield of city investment bonds faced great downward pressure.On January 4,2019,the central bank announced to cut the deposit reserve ratio of financial institutions by 1 percentage point.The market expected loose funds,high sentiment in the bond primary market,increasing the heat of city investment bonds bidding,many city investment bonds issuing interest rates open the bidding floor.It can be seen that the adjustment of deposit and loan rates and the statutory reserve ratio will have a greater impact on the urban investment bond market.The adjustment of the statutory reserve ratio and the adjustment of the benchmark interest rate of deposit and loan will cause the fluctuation of the market interest rate.Adjusting the required reserve ratio will change the money supply and affect the market demand for bonds.In addition,scholars find that monetary policy will significantly affect the bond issuance spread of local government bonds;Since city investment bonds and local government bonds are homogeneous,the monetary policy will inevitably affect the credit spread of city investment bonds in the secondary market.By studying the influence of monetary policy on urban investment bond spreads,we can better understand the bond "credit spread puzzle" from the perspective of monetary policy regulation.It also provides investors with an additional perspective to analyze the law of the bond market and provides certain opinions and Suggestions for management policies.In the research,we take the change value of credit spread of city investment bonds of different credit grades before and after the release of monetary policy as the explained variable and the change value of monetary policy interest rate as the explanatory variable to study the impact of monetary policy on the credit spread of city investment bonds.In the research process,the monetary policy is divided into expected and unexpected parts to explore the impact of the two parts on the credit spread of city investment bonds.In addition,there are asymmetric effects of monetary policy under the economic cycle.Therefore,we will analyze the influence of monetary policy on bond spreads under the economic cycle by distinguishing different stages of the economic cycle.The research content of this paper is as follows: firstly,the influence of monetary policy on credit spreads of city investment bonds is seen through some phenomena.Secondly,the research status and methods of literature acquisition scholars at home and abroad are reviewed and evaluated.Thirdly,it analyzes the influence of monetary policy on bond credit spreads from a theoretical perspective.Fourthly,research methods are sorted out,including the decomposition method of monetary policy,the division method of cycles,and the econometric analysis method.Fifth,empirical study of urban investment bond spreads by monetary policy.Compared with the existing research literature,this paper has the following characteristics.First,the monetary policy is decomposed into two parts,expected and unanticipated.The impact of the credit spread on urban investment bonds is studied.The cross-effects of the two parts are better solved,and the monetary policy can be analyzed and judged more directly.The two parts have an independent impact on the spread of city investment bonds.Second,considering the changes in urban investment bonds with different levels and economic cycles with different stages,this paper analyzes the impact of monetary policy on urban investment bonds.At the same time,this paper also has the following deficiencies.First,the issuance history of urban investment bank bond is relatively short,and the amount of available data is also small.A small amount of data may lead to a decrease in the reliability of the regression results of the model,and the found rules may be unstable.Second,this paper only analyzes the impact of monetary policies on credit spreads starting from the overall yield of city investment bonds,without further analyzing the impact of monetary policies on credit spreads of city investment bonds issued in different regions.