Fund raisers turn to fixed-income deals
Bond issuers seek a combined 110 billion yuan
Government departments, banks and companies announced their plans to raise a combined 110 billion yuan in the mainland's burgeoning bond market yesterday, signalling a trend that more entities will turn to fixed-income instruments for funding amid rising interest rates and credit tightening.
The Ministry of Railway said yesterday it sold 45 billion yuan of bonds to fund new track construction. It comprised 10 billion yuan of 15-year bonds, 26 billion yuan of 10-year bonds and nine billion yuan of seven-year fixed-income securities.
Approved by the National Development and Reform Commission, this is the biggest state-owned corporate bond sale or debt issued by a big state-run agency or firm.
The coupon rate for the 10-year debt was 5.6 per cent, much higher than debts with similar maturity sold last year at 3.75 per cent, reflecting the rise in interest rates.
Meanwhile, the Ministry of Finance will begin selling 30 billion yuan of government bonds to retail investors next Wednesday. The non-tradable bonds will comprise a 24 billion yuan three-year tranche that carries a coupon rate of 5.74 per cent and a six billion yuan five-year tranche that yields 6.34 per cent.
Two tranches of financial bonds also will be launched next week. Agricultural Development Bank of China will issue 10 billion yuan of five-year bonds with a coupon rate of 4.78 per cent next Friday. Export-Import Bank of China one-year bonds of up to 10 billion yuan will be available on Thursday, the two banks announced on the Chinabond website.
China Petrochemical Corp, Asia's biggest refiner, meanwhile said it issued 10 billion yuan of short-term bonds with 182-day maturity to raise funds for projects and to cut financing costs.
Other companies announcing bond issuance plans on the Chinabond site yesterday include Shanghai Electric Group Finance Corp, Liaoning Water Group, Xian Luan Group, Teda Holding and China Railway No3 Engineering Group.
Fan Xiunan, a bond analyst at BOC International, expects more companies will shift to the bond market next year to cut funding costs given the interest-rate uptrend sparked by the state's credit tightening. Corporate bonds without a preset quota and not requiring NDRC approval will be especially popular, Ms Fan said.
In recent issues of 10-year corporate bonds, the coupon rate ranged from 5.6 per cent to 6 per cent, depending on the issuers' credit ratings. For the borrowers, the cost is much lower than the benchmark interest rate of 7.83 per cent for a five-year loan, Ms Fan said.
According to the website of China Government Securities Depository Trust & Clearing, bonds worth about 364 billion yuan were issued in October.
This brought total issuance for the first 10 months of the year to 6.34 trillion yuan, already surpassing the 5.7 trillion yuan total for all of last year.
The total bond depository balance was 11.48 trillion yuan as at the end of October.