China has launched a 4 billion-euro sovereign bond deal with Reuters

HONG KONG (Reuters) – China on Wednesday launched a sale of 4-billion-euro ($ 4.620 trillion) euro-denominated sovereign bonds, raising the country’s $ 4 trillion and driving strong demand through the sale of U.S. dollar bonds.

The Chinese Ministry of Finance is issuing a three-year, seven- and 12-year euro bond, according to a condition sheet seen by Reuters on Wednesday. The ministry said on October 29 that it would issue debt to Hong Kong to raise 4 billion euros.

Beijing regularly issues sovereign bonds offshore to bring China closer to its global financial system and to build a price benchmark for issuing China’s corporate bonds abroad. Last year and 2019, it made sales similar to euro bonds, when Beijing sold its first debt denominated in euros in 15 years.

While euro bond sales are slowing in the Chinese economy, power cuts and commodity prices have risen, while the Chinese dollar bond market has plummeted due to fears of contamination by the China Evergrande Group’s debt problems.

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

“We believe that China will ease its monetary policy to some extent while US monetary policy is tightening,” he said, adding that as a result of declining yields on China’s sovereign bonds and their US and European counterparts, investors are less likely to buy interest rates. . Chinese bonds.

Reflecting investors ’excitement, China’s issuance of a $ 4 billion sovereign bond last month brought out bids worth six times the amount of the offer. The bonds were sold at low intervals for these issues, according to the CICC.

The initial price orientation of the euro-denominated bond has been set at the average swap rate plus 20 basis points for the 3-year agreement, 40 basis points for the 7-year agreement and 65 basis points for the 12-year period. , the term sheet showed.

CICC’s Chen suggested that China should issue sovereign sea bonds more frequently, and that it should increase the tenure of bonds offered to improve further yield curves – a benchmark for Chinese companies to set the price of offshore issuance.

($ 1 = 0.8655 euros)