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Euro-denominated bonds a hot property in HK

By Chen Jia | | Updated: 2021-11-11 22:15
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The Ministry of Finance successfully issued 4 billion euro-denominated ($4.58 billion) sovereign bonds in Hong Kong, reaching a high oversubscription rate among global investors, and the three-year bonds achieved an issue yield flat with the euro bond pricing benchmark for the first time, the ministry said on Thursday, one day after the issuance.

It marks the third consecutive year of the annual euro bond issuance in Hong Kong's offshore market since the country restarted the issuance of this type in 2019.

The issuance attracted multiple orders from many high-profile international bond investors, reaching a 4.3-times oversubscription limit with the final order book above 17.2 billion euro, according to a statement from China International Capital Corporation, an underwriter of the bonds.

The bonds are in three tranches: 1.5 billion euro of three-year, 1.5 billion euro of seven-year and 1 billion of 12-year. The three-year tranche achieved a negative yield again and the issue spread fell to zero for the first time, the finance ministry disclosed.

The issuance has further improved the yield curve of euro sovereign bonds, provided a pricing benchmark for issuers from China and helped to guide market expectations, the ministry said.

The move demonstrated the country's determination to continually promote high-level opening and demonstrated global investors' confidence in China's economic and social development prospects.

Wang Sheng, a member of the management committee and head of investment banking at CICC, said the issuance is poised to set a pricing benchmark for overseas Chinese companies' financing denominated by the euro.

It also diversifies investors' options to invest in China and further strengthens the connection and cooperation between the Chinese and European markets, he added.

In mid-October, the Ministry of Finance issued $4 billion sovereign bonds denominated by the US dollar in Hong Kong, achieving a record low in issue spreads across all tranches for US dollar sovereign bonds in China.

At that time, the issue spread for the three-year tranche fell below 10 basis points for the first time, and the yield approached that of US Treasuries of the same maturity.

The US Federal Reserve's expected policy tightening has intensified the volatility in global financial markets, and the benchmark US Treasury yields show an upward trend.

Since the beginning of this year, the issuance volume of Chinese offshore bonds has declined slightly year-on-year. However, the structure has continued to optimize, with a more diversified industry distribution of issuers and further improved corporate debt structure, Wang said. 

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