CDB, ADB to take advantage of growing demand for yuan bonds

PUBLISHED : Tuesday, 19 October, 2010, 12:00am
UPDATED : Tuesday, 19 October, 2010, 12:00am

China Development Bank and the Asian Development Bank are set to sell more yuan-denominated bonds in Hong Kong to capitalise on the growing demand for yuan products.

CDB will sell 3 billion yuan (HK$3.5 billion) of fixed-rate bonds from today until November 5. The bonds, to be offered to institutional and retail investors, will have a tenor of three years and carry an annual interest rate of 2.7 per cent, payable twice a year.

ADB planned to sell 1 billion yuan of 10-year bonds in Hong Kong with a yield of between 2.85 per cent and 2.9 per cent, Bloomberg reported, citing a person familiar with the matter.

Xiang Songzuo, a deputy chief of the Institute of International Currency of Renmin University in Beijing, said the amount of yuan bonds issued in Hong Kong would keep increasing as the demand was propelled by expectation of further yuan appreciation and the sterling performance of the mainland economy.

'It's very important for Hong Kong to see yuan bonds issued here, in order to be an offshore market of the currency,' Xiang said.

CDB, one of the country's three policy lenders, a week ago announced it was offering 2 billion yuan of floating-rate yuan bonds. Seeing the demand, the bank increased the amount from the planned 1.5 billion yuan to 2 billion yuan.

CDB is the first mainland financial institution to issue yuan-denominated bonds in Hong Kong.

In 2007, it issued 5 billion yuan of bonds and last year it issued another lot amounting to 3 billion yuan, of which 1 billion yuan was in floating-rate notes.

This is the first time a three-year-term yuan bond is being sold in Hong Kong. Previous products were of two-year duration. 'It shows investors' confidence in China's long-term development,' Xiang said, adding the market would eventually see yuan bonds of four or five-year terms.

ADB, which hired Deutsche Bank's Hong Kong branch and Bank of China (Hong Kong) to manage the offering of senior unsecured notes, would hold a media briefing on the sale today, the Manila-based lender said last week.

It would be the first yuan-denominated bond 'to be sold in Hong Kong by a multilateral development bank, and will act as a benchmark for other issuers', ADB said.

The ADB sold 1 billion yuan of 3.34 per cent, 10-year notes in October 2005 and a further 1 billion yuan of 4.2 per cent bonds of the same maturity in December last year, both on the mainland.