US and Chinese Bond Market Dynamic: A Study on the Determinants of Credit Spreads
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DOI: 10.23977/icemgd.2019.001
Corresponding Author
Rongjin Zhang
ABSTRACT
The US bond market is the largest and most matured capital market in the world. Though the Chinese bond market is comparable and has grown significantly to become the third-largest bond market in the world, it has yet to capture much academic attention. This paper utilizes the panel data regression and sets regimes by fitting data into the panel threshold regression to explore the determinants of credit spreads within both successful and developing bond markets. The so-called “rigid repayment” within the Chinese capital market has resulted in the market experiencing similar overall effects as the US bond market prior to 2014. However, the recent declining trend of rigid repayment has resulted in a different dynamic for the Chinese bond market. The US bond market is statistically driven much more by macro variables than firm variables, whereas the credit spread of Chinese corporate bonds statistically has shown a trend of being affected by company performance since 2014.
KEYWORDS
Credit Spread; China; US Bond Market; Panel Data Regression