The Interest Rates Inter-Relationships and the Benchmark Rate in China's Bond Market

摘要

In this dissertation, I study the concepts of benchmark interest rates for the short-term and long-term bonds market, and empirically analyze them for China's bond market. The features according to the different concepts include the lowest yield, risk free and market representativeness. The candidate rates include Shanghai Interbank Offered Rate (SHIBOR), Collateralized Repo Rate (REPO), Deposit Rate, Interbank Offered Rate (IBOR) and the Treasury bond yield to maturity rate (TB). With Granger-causality test and variance decomposition methods, I test the relationship among benchmark rate candidates and the relationship between the candidates and the yield to maturity (YTM) rates of different products, which include the Local Government Bond, City Investment Bond, Railway Bond, Development Bank Bond, the bonds issued by the Export-Import Bank of China and the Agricultural Development Bank of China, Enterprise Bond, Corporate Bond and Central Bank bills. Through these tests, I can study the core feature, the risk free interest rates, on the benchmark interest rate candidates and the inter-relationships of the different interest rates. Moreover, I conduct critical analyses utilizing the Granger-causality test and DAG method. As two common methods used in causality studies, these methods both have defects which might cause the results to deviate from the actual situation. It is difficult to get or calculate a composite index for the yield of the stock market, and it is also difficult to calculate a composite yield for the financial services derivatives market. Therefore, I cannot comprehensively test the effect of the bond market's benchmark interest rate on the stock market and financial services derivatives market. However, previous studies can help us understand part of it.;According to the test results and empirical analysis, when the maturities are equal to one month or less, the Repo rates are the best market benchmark interest rate. The SHIBOR is the best benchmark interest rate for the three month maturity. The deposit rates could be the reference rates for the six month and one year maturities. The Treasury bond interest rates dominate for medium- and long-term securities.