Costlier dim sum offering for Beijing
Yields rise from earlier sale as 13b yuan bond issue draws cooler response from market
The central government paid more to sell bonds in Hong Kong yesterday than a year ago as HSBC forecasts a weaker yuan, while JP Morgan Chase sees appreciation stalling.
The Finance Ministry sold three-year notes at 2.87 per cent as part of a 13 billion yuan (HK$16.2 billion) issuance, up from 1.85 per cent last year, the Hong Kong Monetary Authority said yesterday. The yield on 2015 sovereign dim sum debt surged to a record 3.25 per cent on Tuesday. Similar-maturity US Treasuries yield 0.73 per cent.
President Xi Jinping is tolerating a record cash crunch, despite the slowest economic growth since 1999, after shadow banking activities undermined attempts to cool property prices and local-government investment. Rising risks to the economy, combined with the US Federal Reserve's tapering of stimulus, has cooled demand for Chinese assets.
"The markets have widened further in the last two days and the demand was lower than expected," said Hemant Dharnidharka, head of credit research at SJS Markets. "This is the combined effect of overall risk-off sentiment due to the Fed statement on quantitative tapering as well as China growth concerns and tightening of onshore liquidity."
Yesterday's auction attracted 22.7 billion yuan of orders from institutional investors, 2.3 times their 10 billion sale allocation, HKMA data showed. That is less than last year's 3.8 times.
The yuan has fallen 0.4 per cent against the US dollar from its 19-year high on May 27, as the flow of funds into emerging-market securities slows. The currency would end the year at 6.16 per US dollar, down 0.2 per cent from 6.1474 in Shanghai yesterday, said Paul Mackel, a strategist at HSBC, the top dim sum underwriter.