Transmission effects of real estate risk on municipal bond spreads

Yan Ding, Changzheng Li and Sisi Ye

Finance Research Letters, 2025, vol. 78, issue C

Abstract: Using data from the Shanghai Stock Exchange, Shenzhen Stock Exchange, Interbank Dealers Association, and National Development and Reform Commission spanning 2014–2022 as well as the difference-in-difference technique, this study examines the transmission effect of real estate risk events on municipal bond spreads. Findings reveal that municipal investment bond spreads in risk-sensitive areas increase significantly after a real estate risk event. However, this impact is mitigated by strengthening the government's guarantee ability. Furthermore, this study highlights that real estate risk events have a greater impact on low-credit-rated municipal investment bonds than on high-credit-rated ones, with potential implications for financial market stability and government credit.

Keywords: Municipal bond spreads; Real estate risk; Financial risk transmission (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325005082

DOI: 10.1016/j.frl.2025.107245

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