China launches 4 billion euro sovereign bond deal

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HONG KONG (Businesshala) – China on Wednesday began selling euro-denominated sovereign bonds aimed at raising 4 billion euros ($4.62 billion), three weeks after the country raised $4 billion through US dollar bond sales , which attracted strong demand.

FILE PHOTO: The Chinese national flag is seen in Beijing, China April 29, 2020. Businesshala/Thomas Peter/File photo

China’s finance ministry is issuing euro bonds in three, seven and 12-year tranches, according to a term sheet seen by Businesshala on Wednesday. The ministry said on 29 October that it would issue debt to Hong Kong to raise 4 billion euros.

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Beijing has been issuing sovereign bonds offshore regularly to integrate China more closely into the global financial system, and to create a price benchmark for overseas issuance of Chinese corporate bonds. It made similar euro bond sales last year and in 2019, when Beijing sold its first euro-denominated government debt in 15 years.

Euro bond sales came as China’s economy slowed amid a power crunch and rising raw material prices, while China’s dollar bond market declined on fears of a transition from China Evergrande Group’s debt problems.

Chen Jianheng, head of fixed income research at China International Capital Corp (CICC), one of the underwriters of China’s euro bonds, said Chinese sovereign bonds remain attractive to global investors.

“We think that China will ease its monetary policy somewhat while US monetary policy is being tightened,” he said. Chinese bond.

Reflecting investor enthusiasm, China’s $4 billion sovereign bond issuance bid last month exceeded six times the amount offered. Bonds were also sold at record-low spreads for such issuance, according to CICC.

Initial pricing guidance for euro-denominated bonds has been set at the mid swap rate plus 20 basis points zone for 3-year deal, 40 basis point zone for 7-year and 65 basis point zone for 12-year tranche. , the term sheet showed.

CICC’s Chen suggested that China should issue offshore sovereign bonds more frequently, and extend the duration of the bonds on offer, to further improve the yield curve – for Chinese companies to price their offshore issuances. a benchmark.

($1 = 0.8655 Euro)

Reporting by Scott Murdoch in Hong Kong and Samuel Shen in Shanghai; Editing by Richard Pullin and Ana Nicolasi da Costa

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