A Puzzle of Counter-Credit-Risk Corporate Yield Spreads in China's Corporate Bond Market
Jian Luo
Wang Yanan Institute for Studies in Economics, Xiamen University
Xiaoxia Ye
Stockholm University - School of Busines
4/29/2014 10:11:10 PM
Abstract:
In this paper, using China’s risk free and corporate zero yields with aggregate credit risk measures and macroeconomic 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.
Keyword: 
China’s Corporate Bond Market, Credit Risk, Term Structure of Yields