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25 November 2019

China mulls dollar bond issuance with possible $6 billion offering

A $6 billion issuance would be double the size of last year’s and triple the amount sold in 2017, when China resumed issuing sovereign dollar debt for the first time since 2004.


China is planning a record sale of sovereign bonds in dollars, with a potential $6 billion offering, reported Bloomberg.

The finance ministry of is considering tenors of three years, five years as well as 10 years and 20 years. The move marks the third straight year for China to issue dollar debt and underscores the nation’s continued interest in building out an offshore market where its companies and local authorities can tap funding.

Additionally, the 20-year note will fill a gap between 10-year and 30-year securities issued in 2018.

Anne Zhang, head of fixed income for JPMorgan Private Bank in Asia, said, “It reaffirms China’s determination to develop an orderly offshore dollar bond market for Chinese issuers, the new deal will further complete a sovereign curve.”

China’s sale is planned for this week and follows the country’s first euro bond in 15 years—which saw blowout demand among investors eager to snap up securities with positive coupons amid a swathe of negative-yielding debt.

Bloomberg reported that the Chinese dollar bond market now exceeds $740 billion and is both a key source of funding for domestic borrowers and an outlet for investing Chinese foreign-currency deposits.

Issuance dipped in 2018 after a record 2017, hurt in part by depreciation of the yuan as the US-China trade war erupted. But sales have rebounded this year as US Treasury yields came down. The yuan has also stabilised in recent weeks, following the resumption of Sino-American trade negotiations.

Chinese borrowers have issued $195 billion of dollar bonds so far this year, a record pace, according to data compiled by Bloomberg. The all-time high for a full year was $211 billion in 2017.

Investment-grade securities account for around 53 per cent of Chinese dollar bonds, with high-yield notes at 38 per cent—property developers have racked up record issuance of $78.5 billion this year.

RELATED STORIES: US-China trade war sovereign bonds





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