Monetary Policy,Investor Sentiment And Corporate Bond Credit Spreads

The credit spread of bonds refers to the risk compensation of credit bonds required by investors,and is a significant indicator of interest rate risk premium.With the continuous enrichment of China's credit bond varieties and the relax restrictions of issuance conditions,investors in China's bond market have also gradually diversified.Due to China's bond issuance needs to be guaranteed by relevant institutions in the early stage,investors do not pay much attention to bond credit risk.Since China's bond market broke the “rigid redemption” in 2014,the frequency of bond defaults has gradually mounted.However,the credit spread of bonds has tended to narrow during the early break of the “just redemption”,there can be seen an increase as the level of bond risk exposure increased.Tending to expand,bond credit spread research,which represents bond credit risk,has become an important part of bond pricing.Some studies have found that bond credit spreads are closely related to company-level factors,individual bond-level factors,macro factors,and related market factors.Bond credit spreads not only affect the returns of bond investors,but are also related to the company's financing costs.Therefore,exploring the impact of monetary policy and investor sentiment on corporate bond credit spreads under the new market environment,and the differential impact of monetary policy on corporate bond credit spreads under different investor sentiment,can affect monetary policy and investor characteristics that can help us have a better understanding of the specific impact of China's bond market.On the basis of the theories of mechanisms of monetary policy,investor sentiment,and bond credit spreads,this paper uses unexpired corporate bonds data from the Shanghai and Shenzhen Exchanges from January 2015 to December 2018.Based on the fixed effects model and the panel threshold model to empirically study the impact of monetary policy and investor sentiment on corporate bond credit spreads.On the one hand,in the framework of the analysis of mechanism of monetary policy theory,behavioral finance theory,and corporate bond pricing model theory,this paper theoretically analyzes the mechanism of monetary policy and investor sentiment on corporate bond credit spreads and proposes research hypotheses.On the other hand,this article analyzes the current situation of China's bond market,credit bond market,and corporate bonds.The principal component analysis method is used to construct investor sentiment indicators before conducting an empirical analysis.In terms of empirical analysis,this paper preliminarily analyzes the impact of monetary policy and investor sentiment on corporate bond credit spreads,and then this paper classifies corporate bonds by main credit ratings.Studies the impact of monetary policy and investor sentiment on corporate bond credit spreads under different credit ratings,after which this paper introduces the panel threshold model to objectively classify investor sentiment,examines the differential impact of monetary policy on corporate bond credit spreads under different investor sentiment.Basing on empirical results,this article summarizes the research conclusions and proposes corresponding policy recommendations.The research conclusions obtained in this paper are as follows:(1)Empirical results provide some information: firstly,the looser monetary policy is,the lower the corporate bond credit spread;the higher the investor sentiment is,the lower the corporate bond credit spread.Monetary policy will affect corporate bond credit spreads by affecting the risk premium and transmission channels of monetary policy,investor sentiment in the stock market will be affected by the stock market and bonds.The common information base of the market is contagious to the bond market or the investor's investment behavior is changed due to the substitution relationship between stocks and bonds,which changes the demand for corporate bonds and affects corporate bond credit spreads;investor sentiment and monetary policy affect corporate bond risk appetite.The impact of the premium and investor sentiment on the transmission channel of monetary policy will cause the differential impact of monetary policy on the credit spread of corporate bonds under different investor sentiments.(2)Under different credit ratings,monetary policy and investor sentiment have different effects on corporate bond credit spreads.Corporate bonds with higher credit ratings are less risky,and market investors have lower demand for high-credit-rated bonds.Credit-rated bonds are also more stable,so high-credit-rated corporate bonds are less affected by macroeconomic factors such as monetary policy.(3)There are significant differences in the impact of monetary policy on corporate bond credit spreads in different investor sentiment thresholds.At the height of investor sentiment,the negative impact of monetary policy on corporate bond credit spreads is more pronounced.This shows that when investor sentiment is high,the lower the sensitivity of investors to corporate bonds,the greater the demand for corporate bonds.When the monetary policy is looser,investors 'good expectations of the macro economy will be strengthened.At the same time,investors expect interest rates to fall,believing that the company will receive more credit resources,and have more confidence in the company 's operating conditions.The lower the credit compensation requirement.Finally,based on theoretical and empirical results,the policy recommendations as follows:(1)Through the combination of different monetary policy tools,unblock the monetary policy transmission mechanism,and guide the bond market to form a more scientific and reasonable credit spread structure to support the direct financing market rapid development;(2)Different regulators make policies through co-ordination and prudence in order to guard against risk contagion in capital markets;(3)Pay attention to structural risks in the bond market and play the active role of inter-ministerial coordination mechanisms for corporate credit bonds to improve the bond market default settlement mechanism.