The impact of real estate market risks on the issuance costs of urban investment bonds

Evidence from China

Bibliographic Data

ID6045484
AuthorsYan Dong (0009-0008-5989-4201, Southwestern University of Finance and Economics), Dingyuan Hu (0009-0004-7256-5040, Southwestern University of Finance and Economics, corresponding author)
Year2024
Volume4
Issue3
Pages151-166
Publication date2024-09-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueChina Economic Quarterly International (JOURNAL)
Journal identifiersISSN: 2666-9331 • E-ISSN: 2666-9331
PublisherElsevier BV (PUBLISHER)
DOI10.1016/j.ceqi.2024.09.004
OpenAlexW4402888935
LanguageEN
References cited7

It has been widely believed that bond spreads are positively correlated with related market risks. However, some studies in China's urban investment bond (UIB) market indicate that an increase in real estate market risks usually narrows UIB spreads. This article focused on such puzzle and introduced a quadratic form regression to detect a U-shaped relationship between housing price volatility and UIB spreads, which confirms that UIB pricing is actually in consistence with the traditional bond theory. We further indicated that spreads of guaranteed UIBs were barely affected by housing price volatility, and fiscal transparency seemed to mitigate such volatility's impact on the issuance costs of UIBs. Those findings not only illuminate ways of mitigating risks in the UIB market in China using market instruments but also have important implications for how local governments around the world can mitigate their debt-related problems

Bond · Business · Capitalization rate · China · Financial system · Geography · Real estate · Real estate development · Real estate investment trust · Credit Risk and Financial Regulations · Financial Markets and Investment Strategies · Housing Market and Economics · Finance

Tools

Open DOIOpen Access