Research on How Predictive Chinese Bond Spreads Is of Macro Economic Indices

Abstract

Abstract:

Bond market is the second largest financial market in China. Previous studies have shown that the bond spreads contain information predictive of macroeconomy, but few studies focus on how predictive Chinese bond spreads are and most of them still stick to traditional bond spreads. It is necessary and urgent to construct new and powerful predictive bond spread indicators. This paper applies the ground-up approach to construct a new representative credit spread index, namely private enterprise credit spread index. We find that the private enterprise credit spread index has the best predictive ability compared with traditional spreads, and it is the key spread index of the Chinese bond market. By establishing the VAR model, we find that the impact of the private enterprise spread will raise the financing cost of the real economy, and reduce both the investment in fixed assets and the price level, thus causing the economic growth to slow down. Besides, the private enterprise spread index will play a role in the macroeconomic monitoring.

Key words: bonds, credit spread, macro economy, forecast, key spreads

Wang Lei, Nie Changhong. Research on How Predictive Chinese Bond Spreads Is of Macro Economic Indices[J]. , 2019, 31(5): 66-76.

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