World Bank Debuts Mulan SDR Bonds, First Such Notes in Over Three Decades
Yicai Global
/SOURCE : Yicai
World Bank Debuts Mulan SDR Bonds, First Such Notes in Over Three Decades
(Yicai Global) Sept. 1 -- The World Bank yesterday sold bonds denominated in special drawing rights (SDR) in China's interbank market. Dubbed Mulan bonds, the notes are the first of their kind in 35 years.

The three-year bonds, worth 500 million SDR, will be settled in Chinese yuan, also known as renminbi.

"The World Bank is proud to issue these SDR bonds, with the aim of supporting the Chinese government's efforts to promote the internationalization of the renminbi," said Mr. George Richardson, director of the World Bank's capital market department.

China is ambitious for its currency, championing its wider use across the world. Last month, the country's central bank said it would push forward with various measures to further internationalize the yuan. The landmark issue of SDR bonds comes a month before the yuan joins the International Monetary Fund's SDR basket of reserve currencies and just days before China hosts its first G20 heads of government summit in Hangzhou from Sept. 4 to 5.

The World Bank named the notes Mulan because they "have a smaller group of investors, compared with other markets like that of Panda bonds," Mr. Richardson said. He also said the People's Bank of China first proposed the idea of SDR bonds.

Hua Mulan was a legendary Chinese woman warrior who took up her elderly father's place in the army. She is the protagonist of Disney's 1998 animated movie, Mulan.

Mr. Richardson also confirmed that the yield on the SDR bonds would be no more than 1 percent, but did not believe that would affect investor enthusiasm.

"The yields of China's renminbi-denominated bonds have generally been high, but the SDR bonds will be different," he said. "This interest rate is decided upon after the interest rates of a basket of currencies have been taken into consideration, so it is very reasonable."

"The IMF welcomes the SDR bonds," Mr. James Daniel, assistant director of the IMF's Asia and Pacific Department, told Yicai Global. "In fact, the IMF is actively exploring how to improve the stability of the international monetary system by using SDR bonds. Efforts in this regard are still under way."

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