Based on the background of the independent issuance of local governments in China, this paper uses the modified KMV model to carry on the empirical analysis to measure the credit risk of the bond. This paper analyzes and predicts the guaranteed fiscal revenue and its growth rate and volatility of the issuance of Shanghai government bonds in the future, and then forecasts the safe issue-volume of different period bonds. From the point of view of default probabilities, the credit risk of Shanghai government bonds is very small, but it will increase with the increase of the scale of issuance. This paper finally proposes some policy suggestions based on the research results.