(Yicai) April 11 -- Issuers of Chinese panda bonds renewed a record high in the first quarter as interest rates remain persistently elevated in the United States.

Issuance hit a new high of CNY67.4 billion (USD9.3 billion) in the first three months of this year, up more than three times from a year ago, Shanghai Securities News reported today, citing data from Bloomberg. Panda bonds refer to yuan-denominated notes issued by foreign financial institutions and multinational corporations in China.

Through last year, the issuance of panda bonds rose by more than four-fifths to surpass CNY150 billion (USD20.7 billion) from 2022, also a record high. As of March 31, the balance of panda bonds tallied CNY275.4 billion.

In comparison to the US bond market, yuan bonds boast advantages in terms of financing costs, said Huang Jiacheng, managing director and head of Asia-Pacific fixed income at Invesco. Most MNCs used to raise funds in the US earlier during an era of low interest rates, converting the proceeds to yuan to inject funds into local branches. But as the Federal Reserve kept hiking the rates, firms turned to the mainland bond market, Huang said.

China is optimizing its panda bond mechanism. The People’s Bank of China wrote in a notice in December 2022 that overseas organizations can use the proceeds of such notes in China or even abroad.

In the medium and long run, the expanding market size of panda bonds will facilitate the internationalization of the yuan, Huang said, adding that such growth will help policymakers improve the circulation of the currency at home and abroad while laying a solid foundation for using the redback more to pay for foreign trade.

Editor: Emmi Laine