Japan Society for the Promotion of Science:Grants-in-Aid for Scientific Research Grant-in-Aid for Scientific Research (C)
Date (from‐to) : 2017/04 -2020/03
Author : Ishida Mitsunari
In this study, we quantitatively examine two aspects of Japan's municipal bonds that are publicly offered in the market: (1) the effect of obtaining credit ratings, and (2) whether the credit risk spillovers are observed in the municipal bond market.
With respect to (1), we find that the credit spreads were 1.7 ~ 2.3 bps lower in municipalities that obtained a credit rating than in those that did not. In addition, we found that worsening fiscal conditions increased the spread. With respect to (2), it was shown that when the spreads increase in other municipalities with similar financial conditions, my own spreads also increase. This result suggests that there is a horizontal credit risk spillover in Japan's municipal bonds market.