At the firm level, existing knowledge show that green bond issuance serves as a signal for environmental commitment. It is interesting to know whether such signaling effect works at an aggregated level to improve air quality. This study examines whether cities with more green bond issuance will experience stronger improvement in air quality. Using a city level data in the PRC, this study finds that cities that actively participant into the green bond market and issue more green bonds witness greater improvement in air quality and fewer heavily polluted days in the subsequent year.  This findings confirms that green bond signaling effect are able to generate positive environmental externality at the city level.