As a risk mitigation tool widely used in debt financing, third-party guarantee is an important exploration direction for establishing a market-oriented implicit local public debt(ILPD) risk disposal mechanism. Based on the issuing and trading data of urban investment bonds(UIBs) from 2014 to 2020, this paper distinguishes two types of guarantors: “financing guarantee company”(FGCs) and “local government financing vehicles”(LGFVs), and systematically investigates the risk mitigation effect of third-party guarantee on ILPD. (1) The related guarantee between LGFVs can increase the correlation risk and push up the issuing premium of UIBs. (2) The professional guarantee provided by FGCs can provide incremental information by sending guarantee signals and reduce default losses, driving the issuing premium and trading spreads of UIBs by 0.089%-0.46% on average. (3) Professional guarantee can also be a “timely help”. For debt-issuing LGFVs with weak fundamentals and less political resources, and market environments in which default occurs and external credit support is needed, FGCs will play a more significant role in risk mitigation. This paper reveals the specialized market force of FGCs, which has been neglected for a long time but can effectively mitigate the risks of UIBs. It has important practical value for the disposal of ILPDs especially under the current debt default cluster.