(Yicai Global) June 12 -- The Asian Infrastructure Investment Bank issued its inaugural yuan-denominated Sustainable Development Bond worth CNY3 billion (USD424.7 million) in China’s inter-bank bond market yesterday.

Overseas investors were 65 percent of takers of the debt instrument, whose maturity is three years, and which bears a 2.4 percent coupon rate.

The overall subscription of AIIB’s first panda bond -- a yuan-denominated bond issued by a non-Chinese and sold in China -- almost trebled its face value, about 2.8 times, as both overseas and domestic institutional investors scrambled to snap them up. More than 20 investors secured an allocation.

“The debut panda bond issuance represents an important milestone for AIIB as we enter the Chinese bond market for the first time,” said AIIB President and Chair of the Board Jin Liqun.

"The issuance will raise important capital to facilitate AIIB’s response to COVID-19 in the short term and maintain its commitment to investing in sustainable infrastructure in the long term,” he added.

Countering Corona

The bonds, styled ‘Combating COVID-19,’ and which gained approval from China’s National Association of Financial Market Institutional Investors, are specially issued for the control and prevention of the novel coronavirus. The risk weights of AIIB’s issuance in China is zero, per the consent of the China Banking and Insurance Regulatory Commission. The AIIB, a multilateral development bank whose global credit rating is AAA, is the first to debut the panda bond in China since the 2018 advent of the new regulations governing them.

"The issuance will raise important capital to facilitate AIIB’s response to COVID-19 in the short term and maintain its commitment to investing in sustainable infrastructure in the long term,” Jin continued. “As an international organization headquartered in Beijing, AIIB is also playing a role in the internationalization of China’s capital markets by providing both onshore and offshore investors with a very high quality RMB investment. This successful transaction serves as an important benchmark for our future issues in the years ahead,” he noted.

The bank has successively provided urgent financing for Covid-19 control and prevention projects in China, Pakistan, India, Indonesia, the Philippines, Georgia, Bangladesh and other member nations since the disease first broke out. The AIIB set up the Covid-19 Crisis Recovery Facility on April 3 with initial credit of USD5 billion to provide fast funding for public and private institutions hard hit by the pandemic. The bank decided to raise such credit and double it to USD10 billion on April 16.

The AIIB began operations on Jan. 16, 2016. It has 102 member nations and has collectively approved fund-raising projects worth more than USD16 billion.

A panda bond is a yuan-backed note that overseas and multilateral financial organizations issue in China. Local-currency bonds of this type are usually named for the nation’s most high-profile animal mascot, per international convention.

Editor: Ben Armour