Recently the rapid accumulating of local government debt，among which municipal bonds are an important component，has attracted the authorities’great attention. This paper investigates the“local oligopolies”phenomenon in Chinese municipal bonds’underwriting markets and its economic consequences. The paper finds that，first，local relationship underwriting bonds demonstrate significant lower interest rates，and that there is no significant quality advantage in local relationship underwriting bonds when using post-issuance credit rating changes to capture bond quality. This indicates that local relationship underwriting in municipal bond markets has eroded the interests of investors. Second，using territorial jurisdiction and ownership to measure the local relationship intensity，these effects of local relational underwriting are found to increase with the relationship intensity. Third，local political uncertainty (capturing regional institutional environment change) effectively alleviates the conflicts of interest by curbing the local government’s intervention motivation and capability，while the 2015 regional government debt reform (reflecting period institutional environment change) exerts limited influence on these effects of local relational underwriting. Besides，local relationship underwriting is driven by local factors. This paper provides theoretical basis and empirical evidence for the authorities to evaluate the potential risk of local government debt and to accelerate the market-oriented reform in local government debt markets.