Yield demand deters dim sum debt issuers

Bond issuers are finding raising offshore yuan less attractive because of the higher yields they are having to offer buyers these days.

The cost of funding the so-called dim sum bonds has risen as the swap rates between the yuan and the US dollar are at record lows, tempering the pace of investment-grade corporate bond issues by foreign issuers, industry experts said at a forum yesterday.

New issues of dim sum bonds grew about 20 per cent to US$5.2 billion in the first four months of this year from the same period last year, according to data from Dealogic.

Sven Lautenschlager, an international funding officer at the treasury department of German financial institution L-Bank, which has issued four tranches of dim sum bonds in the past, said the firm was looking to issue the fifth tranche this year but could not find a good price.

Lautenschlager said L-Bank would have to pay a premium of about 110 basis points for dim sum bonds with a tenor of more than five years. In contrast, the premium would be only 10 basis points in the euro bond market.

Vincent Ho Siu-hung, a senior vice-president at the treasury department of China Construction Bank (Asia), said the yield was increasing because more issuers were tapping the dim sum bond market.