Interest rate of short-term bonds issued
|Keywords||commercial paper issuing spread central ban note rate shibor rate inter bank repo rate credit rating|
The commercial paper emerged in year 2005. Its appearance provides the various enterprises a new short term financing channel apart from the short term loan and discount note. On the other hand, it also offers the investors a short term fixed income investment tool. With the ongoing functioning and improvement of the commercial paper market, the characteristic of market pricing prevails. This is a new topic for both the enterprise aiming to tap the market as well as the investors. This paper uses the data up to 2010.6.30 to study the interaction between the commercial paper issuing rate and the base rate, issue size, issuer’s industry, credit rating.This paper innovatively uses three groups of base rate, namely the central bank note issuing rate, shibor rate and the inter bank repo rate. The empirical analysis shows that shibor rate excels among the three rate sets, which implies that its role as the key base rate in China has been confirmed. Serving for the monetary policy, the central bank note issuing rate is not good enough as a base rate. Severe maturity mismatch in the inter bank repo rate makes it inappropriate, either. The empirical analysis also shows that the commercial paper issuing rate is negatively correlated with the issuing size, which confirms that larger amount will lower investors’requirement for liquidity premium. Furthermore, we find that the current credit rating could hardly offer any advice for the commercial paper spread.This paper provides some advices for both the issuers and the investors based on the conclusions from the analysis.