The Impact of Price Shocks on the Issuance of Chinese National Debt

Abstract

Abstract:

In this paper, we select the 7-year and 10-year bonds issued between 2010 and 2014 to study the impact cost generated by the issuance of treasury bonds, and explain its reasons. Firstly, by the event study method we find that there is a "V"-shape price shock in the national debt issuance; then the degree of shock is calculated by constructing arbitrage portfolio; thirdly, through the shock on the bond between the adjacent bonds, we find that the price shock does not exist when the bond is issued, which rules out the "supply shocks" hypothesis; lastly, by studying the relationship between price shocks and repurchase market collateral repo rate changes and bond price volatility, we prove that the shock of bond issuance is mainly derived from the hedging behavior of primary dealers.

Key words: national debt, issuance price shocks, inter-bank market

Meng Qingbin, Fan Wei, Wu Cong, Shi Qian. The Impact of Price Shocks on the Issuance of Chinese National Debt[J]. , 2017, 29(10): 34-41.

References

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