What factors influence Chinese government bond yields?
DOI:
https://doi.org/10.13133/2037-3643/18503Keywords:
Chinese Government Bonds, Long-term interest rates, Short-term Interest Rates, People’s Bank of China, John Maynard KeynesAbstract
This paper models the dynamics of long-term Chinese government bond (CGB) yields based on an autoregressive distributive lag (ARDL) approach. It examines whether the current short-term interest rate has a decisive influence on long-term CGB yields, after controlling for various macroeconomic variables. The estimated models all show that the current short-term interest rate has an economically and statistically significant effect on the long-term CGB yields of various maturity tenors. John Maynard Keynes claimed that a central bank’s policy rate exerts an important influence over long-term government bond yields through the current short-term interest rate. The paper’s findings evince that Keynes’s claim holds for China, implying that the actions of the People’s Bank of China(PBoC) are a key driver of the long-term CGB yields.
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