(Yicai) Sept. 26 -- German carmaker Volkswagen has issued its first yuan-denominated bonds worth about CNY1.5 billion (USD205.2 million) to gain funds and the demand has been overwhelming.

The Wolfsburg-based automotive company is the first pilot issuer of panda bonds with the purpose of optimizing the pricing and placement mechanism of such debt instruments issued by foreign and multilateral institutions in China, the National Association of Financial Market Institutional Investors announced yesterday.

The mechanism encourages issuers to carry out non-deal roadshows and be flexible when determining the scale of issuance. In this case, Volkswagen's joint lead underwriters, China Construction Bank and HSBC China, organized private meetings with institutional investors.

Volkswagen's novel two-year note carries an interest rate of 3.05 percent. Subscription demand tallied over three times the scale of issuance or nearly CNY5 billion. More than 30 investment institutions, including public funds, foreign-funded asset management institutions, as well as Chinese and foreign banks subscribed to the bonds.

Since 2013, many multinational enterprises, including Mercedes-Benz, waste management firm Veolia Environnement, industrial gas giant Air Liquide, base minerals trading company Trafigura Group, and BMW Group, have issued a total of CNY127.6 billion (USD17.5 billion) of panda bonds to fund yuan operations and investment.

Next, the NAFMII will actively introduce multinational enterprises to China's interbank market, promote market-oriented pricing, and further open up the bond market, it added.

Editor: Emmi Laine