(Yicai) May 21 -- The first tranche of China’s ultra-long special treasury bonds closed 1.3 percent higher on their first trading day in Shanghai, after surging by as much as 25 percent.

The bonds [SHA: 019742] jumped 13 percent when the market opened, causing a trading halt. After resuming trading at 10 a.m., the bonds quickly rose again, soaring 25 percent in a few minutes and triggering a second suspension. They began trading again at 3.27 p.m., and in the three minutes before the market closed sank back to CNY101.32 (USD14). 

The CNY40 billion (USD5.5 billion) of 30-year notes, which carry a 2.57 percent coupon, were sold on May 17. The rest of the CNY1 trillion (USD138.2 billion) will be issued in 22 tranches between mid-May and mid-November, with terms of 20, 30, and 50 years, a finance ministry note said on May 13. The coupon is paid every six months.

Given high investment risks in the Chinese real estate and capital markets, long-term investors have few high-quality assets to choose from, Wen Laicheng, a professor at the Central University of Finance and Economics, told Yicai.

Ultra-long special treasury bonds are among them, Wen said, adding that there is strong demand for these securities and investors are eager to subscribe. But individual investors should be cautious because the bonds have long maturities, so a loss is possible if they are redeemed early to meet any personal financial need, Wen pointed out.

The ultra-long special treasury bonds are mainly targeted at financial institutions, Yicai learned, though some banks took subscriptions from individuals on May 20, which resulted in them selling out quickly.

The Chinese government’s work report delivered by Premier Li Qiang in March said the authorities would issue these bonds over many years in order to carry out China’s core strategies and build security in key areas.

Editors: Dou Shicong, Futura Costaglione