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China's corporate bond interest rate pricing mechanism of the

Author: ChenGuoLi From: www.yourpaper.net Posted: 2009-03-31 17:41:43 Read:
Abstract: At present, China's corporate bond interest rate cap regulation is an important factor restricting the development of corporate bonds, interest rate pricing market-oriented is the core content of the corporate bond market orientation, we should vigorously develop the corporate bond market, you must enable enterprises market-oriented interest rate pricing of bonds, using a wide range of pricing mechanisms.
Keywords: corporate bonds; pricing mechanism; rating system; interest rates; financial risks

In the third national financial work conference closed on January 20, 2007, Premier Wen Jiabao put forward for the development of the bond market: "vigorously develop the capital market, to build a multi-level financial market system to expand the size and proportion of direct financing." bonds issued by enterprises, vigorously expand the development of the corporate bond and improve the bond management system. "accelerate the development and improve the bond market, in the current economic development in China has an important significance. A long time, China's single structure, corporate finance relies on indirect financing of the bank's larger proportion of direct financing and indirect financing development is uneven. According to statistics, over the past 10 years, the proportion of direct financing for Chinese enterprises, including stocks, corporate bonds, corporate bonds, only about 10% of the same period, Japan, Germany, the proportion of direct financing of U.S. companies, respectively, 50%, 57% and 70%. In the direct financing of these countries, the size of the corporate bond issuance over the stock market, corporate direct financing major way. The size of the U.S. bond issuance in 2005 is about 6.5 times the size of the stock issue. Corporate bonds and corporate bonds issued in China in 2006 is equivalent to only 44% of the equity financing for the same period. The development of China's corporate bond market is also relatively backward; bond market development has lagged in the stock market, the level of development of the corporate bond on the bond market has lagged far behind in treasury bonds, financial bonds and bond products. Of course, there are many factors restricting the development of China's corporate bonds, such as problem management system, the development of institutional infrastructure issues, corporate bond interest rate cap regulation is an important factor restricting the development of the corporate bond.

one of China's corporate bond interest rate formation and disadvantages

, Modified in 1993, corporate bond Management Regulations "provisions of Article 18:" The corporate bond interest rate shall not exceed 40% of the savings and time deposit rates of banks the same period of the residents. " The maximum set introduced in 1993, the rectification period, when the country is in restoring financial order, governance, social high interest stage of collecting funds, the highest interest rate restrictions can prevent some low-grade enterprise by raising interest rates to attract investors, and ultimately repayment of high interest rates can not cause the financial risk. However, with the development of the capital market, this upper limit approval limit has been exposed many problems. Its drawbacks mainly manifested in the following aspects:

(A) Interest rate cap regulation affects the attractiveness of corporate bonds

The early 1990s in the case of higher interest rates on bank deposits, the size of loans under strict control, corporate bonds, interest rates can be higher than 40% of the deposit rate, the conditioned space, funding principal and investment body has attractive. May 1, 1996 5-year Lump interest of 12.06%, so 5-year corporate bond interest rate up to 16.88%, corporate bond interest rates 4.82 percentage points higher than bank deposits more attractive for investors. Although the central bank has been several times to raise interest rates on March 18, 2007, but the 5-year Lump interest is still relatively low; narrowing as the central bank has repeatedly cut interest rates spreads on corporate bonds and deposits was 4.41%, so 5-year corporate bond rates up to 6.17%, the 20% of the income tax deduction of corporate bonds, corporate bonds, interest rate of 4.94%, only 0.53 percentage points higher than bank deposit rates, not attractive for investors. Plus a variety of investment channels gradually increased, increased investment choice than ever, will undoubtedly affect the subscription enthusiasm of investors in corporate bonds, corporate bonds naturally will be left out in the cold, and greatly hindered the issuance of bonds. In order to break through this ceiling, many companies choose to issue bonds for more than five years, only 5-year period following the regular savings banks deposit rate, if more than 5-year corporate bonds issued, interest rate options, there is no constraint foundation, corporate this way to circumvent the interest rate cap regulation.

(B) Interest rate cap regulation does not reflect the risk profile of the enterprise

Rigid and fixity of corporate bond issuance rates increased risks of the issuers and investment body, weaken the competitiveness of the bonds as an investment tool. Corporate bond issuance plan mode determines the interest rates of corporate bonds non-market-oriented, can not accurately reflect the good and bad of the bond itself from bond interest rates, the actual operation, the enterprise in order to ensure the smooth issuance of the bonds, regard the interest rate set at the maximum limit, 22 enterprises to issue corporate bonds in 1998, 16 enterprises, regardless of the level of credit rating, coupon rate was 6.93%, and results of the bond interest rate does not reflect the real changes of the demand and supply of funds and different enterprise risk differences, resulting in high-quality corporate The high cost of bond funds, general corporate bonds and free of risk and return. This pricing mechanism seriously distorted corporate bond price signals, and departure from the match the risk and return than the laws of the market, causing corporate bond market distortion. The corporate bond market has less risk mechanism, resulting in lack of elasticity of demand for corporate bonds. Especially in the current period of low interest rates, a serious impediment to the development of the corporate bond market.

(3) bond rating can not have an impact on interest rates

Abroad, the bond rating is a corporate credit situation, help investors a comprehensive understanding of the issuer's credit status is the main basis of the bond investment decisions investors, thus affecting the cost of the bond issue. In China, the interest rate of the bonds is controlled, regardless of the level of credit rating, corporate bonds, interest rate levels consistent. In financing costs and benefits of the decision, the credit rating regardless of the issuer or investors have lost its meaning, the rating "high credit, no difference." Corporate bond credit rating of most of the corporate bonds issued in China to obtain the highest AAA rating, listing all of the AAA level, few companies are able to obtain the highest level in the United States. Therefore, the significance of the bond rating is not great, the purpose of the rating in a greater extent in order to meet the requirements of the competent authorities, rating the importance of status is very difficult to establish. Of course, this has a great relationship with China's corporate bond credit rating system is imperfect, corporate bond credit rating system exists: the relevant laws and regulations are not sound enough, and the supporting; credit rating authoritative low impartiality; in bonds market risk control, more emphasis depends on the administrative examination and approval of the government on the issue of the application and provide issue listed guarantees; credit rating of the program is not sound enough, strict; China's bond market is not uniform, these factors influence the development of the corporate bond rating market.

, nurture and improve China's corporate bond interest rate pricing mechanism

Corporate Bond Management Ordinance 2001 Amendment "every year, talking about the new ordinance is expected to be released, but in the end always disappointed. The revised "Corporate Bond Management Ordinance, in addition to the corporate bond approval system reform, corporate bonds, interest rate cap regulation will reform. Should vigorously develop the corporate bond market interest rate pricing of corporate bonds must be so diversified pricing mechanism, because the interest rate pricing market-oriented is the core content of the corporate bond market orientation.

(A) Treasury yields as a benchmark interest rate for corporate bonds

The national debt of a country's level of interest rates as the cost of risk capital levels should become the basis of the pricing of financial products. Benchmark bond yields as interest rates in many developed countries such as the United States, Canada, Japan and other countries. China's government bond issue has begun to take shape after years of development, the Treasury yield curve has been basically formed, and the pricing of corporate bonds can be conducted on the basis of the Treasury bill rate.

How to determine the level of the interest rate of the national debt has become a key issue. At present, China's government bond market is divided into the inter-bank bond market and the exchange bond market, two markets in the divided state, did not form a unified government bond market. Thus, China's government bond yield curve is difficult to make objective context. In my opinion that in the present circumstances, it is necessary to strive for regular, balanced and scroll to issue several critical deadlines fixed-rate government bonds, so that they become the benchmark government bonds and the formation of an issue of the interest rate curve. Meanwhile, clean up or even cancel the unreasonable provisions in the national debt transactions, conduct derivatives transactions based on benchmark government bonds at the right time, to improve the liquidity of the Treasury market, the eventual establishment of a stable and reliable of the Treasury yield curve.
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