This paper examines the pricing mechanism of Chinese local government bonds and estimates the impact of the reform policy implemented in May 2018. Our findings indicate that before the reform policy, the bond spread was significantly depressed by the intervention of local governments. However, this pattern diminished after the implementation of the reform policy. After the reform, the pricing of local government bonds exhibited a stronger correlation with market liquidity and policy uncertainty while remaining insensitive to the debt burden of the local government. Furthermore, compared with general bonds, the pricing of special bonds shows less association with risk factors.