Counter-Credit-Risk Yield Spreads: A Puzzle in China’s Corporate Bond Market
Forthcoming in International Review of Finance
72 Pages Posted: 17 Jan 2014 Last revised: 16 Jan 2016
Date Written: January 2, 2016
In this paper, using China’s risk-free and corporate zero yields together with aggregate credit risk measures and various control variables from 2006 to 2013, we document a puzzle of counter-credit-risk corporate yield spreads. We interpret this puzzle as a symptom of the immaturity of China’s credit bond market, which reveals a distorted pricing mechanism latent in the fundamental of this market. We also find interesting results about relationships between corporate yield spreads and interest rates as well as risk premia and the stock index, and these results are somewhat attributed to this puzzle.
Keywords: China’s Corporate Bond Market, Credit Risk, Term Structure of Yields
JEL Classification: G12, E43
Suggested Citation: Suggested Citation