Investors Oversubscribe Six Times to China’s USD4 Billion of Sovereign Bonds
Xu Yanyan | Liao Shumin
DATE:  Oct 20 2021
/ SOURCE:  Yicai
Investors Oversubscribe Six Times to China’s USD4 Billion of Sovereign Bonds Investors Oversubscribe Six Times to China’s USD4 Billion of Sovereign Bonds

(Yicai Global) Oct. 20 -- The USD4 billion of sovereign bonds China’s finance ministry issued in Hong Kong yesterday were six times oversubscribed, and achieved the lowest yield spread in history compared with US Treasuries.

The coupons on the three-year USD1 billion debt, five-year USD1.5 billion, 10-year USD1 billion and 30-year USD500 million reached 0.75 percent, 1.25 percent, 1.75 percent and 2.5 percent, respectively, Xinhua Finance reported.

The corresponding issue prices were T+6 basis points, T+12 bps, T+23 bps and T+53 bps, the report added. For the first time, interest rate spreads for three-year bonds fell below double digits, further approaching the benchmark US Treasury bond levels.

The USD4 billion in bonds have been well received by global investors, according to Samuel Fischer, head of Capital Markets China at Deutsche Bank.

The historic-low spread between China’s US dollar-denominated government bonds and US Treasury bonds with the same maturity reflects the market’s strong confidence in China and the attractiveness of China’s sovereign debt, he said.

China’s gross domestic product grew 9.8 percent annually in the first three quarters of this year, above its full-year target of 6 percent, and the global appeal of China’s capital market has grown, with foreign holdings of Chinese government bonds now rising to 11 percent.

Deutsche Bank expects the proportion of foreign holdings to continue to grow as China’s capital market further strengthens its collaboration and integration with the world.

After a 13-year moratorium, the finance ministry restarted offshore dollar bond issuance in 2017 and has since established a normal sales mechanism for such debt. Between 2017 and 2021, the country issued such bonds 17 times, totaling USD21 billion.

Editor: Peter Thomas

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Keywords:   Ministry of Finance of China,Sovereign Debt