Investors pounce on China dollar bonds

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International investors piled into a rare global bond offering from China with orders topping 22 billion US dollars and oversubscriptions of more than tenfold.

The issuance of US dollar-denominated Chinese sovereign bonds, a rare opportunity for overseas investors, may be a significant move towards greater opening up of the market. .

The more that foreign investors participate in the Chinese capital markets, the better they will understand the Chinese economy, The Ministry of Finance has previously stated.

“The issuance of the sovereign dollar bonds set a benchmark for Chinese companies that want to expand overseas," noted Shi Yaobin, vice minister of the ministry. "They can use it as a pricing tool when they need raise capital internationally,”

Data from the ministry shows that the bond attracted 22 billion US dollars’ worth of orders. The demand was high with all the bonds were sold out within an hour. Investment banks like Citi, HSBC, and Deutsche Bank all participated in the buying.

The Bank of China, one of the lead underwriters, told CGTN that orders topped over 10 billion US dollars in the first hour after books opened on Thursday, more than five times the amount on offer.

The yield of the five-year bonds at 2.196 percent is 30 to 40 basis points (bips) more than the US 5-year treasuries, while 10-year bonds yield were 40 to 50 bips higher than the US 10-year treasury note, at 2.687 percent.

The 2 billion US dollars Chinese sovereign bonds is the first global bond sale in 13 years following the last such issuance in 2004, when the country raised about 1.7 billion US dollars in dollar and euro-denominated bonds.

"As more Belt and Road projects are expected from the future, the demand of overseas investments and financing are expected to rise as well,” said Shi, “so sovereign currency bonds will help Chinese companies to get a better pricing reference in the capital markets. This is very important."

(Mao Dan also contributed to this report.)