4 issuers tap dim sum bond market
Deal launches within short period point to diversity and depth of the dim sum market
Four dim sum bonds from four issuer nations hit the markets over a 24-hour period, showing the newfound diversity and depth of this market.
"We have witnessed the evolution of the [offshore yuan] market. The fact we can do four deals in one day from four countries targeting different investors is a sign of maturity," said a banker close to the issuers.
On Wednesday night, Italian bank Intesa Sanpaolo brought a 650 million yuan (HK$828 million) five-year bond.
That was followed closely by three-year deals from Mitsubishi UFJ of Japan, Unilever of the Netherlands and China Citic Bank.
The Unilever bond was capped at 300 million yuan, while Mitsubishi and Citic targeted "benchmark" size.
Issuers were taking advantage of a favourable basis swap, by which offshore issuers swap proceeds from yuan into euros or another currency and still achieve a competitive cost of capital, a banker said.
Intesa Sanpaolo has little business need for yuan and was likely looking at the deal on a swapped basis. The second banker estimated it paid a premium of 15 basis points for its capital by pricing in yuan and swapping into euros.
By tapping the dim sum market - the issuer's first such deal - it expanded its investor base and established a yield curve in this promising and growing market.
"They are paying for diversification," the second banker said. "This premium used to be way more but it's come down since last year, prompting some issuers to take a strategic view that they need to get into the yuan market."
The Intesa Sanpaolo bond offered 4.5 per cent yield, generating 1.1 billion yuan in demand.
Unilever's issue was launched at a yield of 3.25 per cent and priced at 2.95 per cent. Its deal was 6.6 times subscribed. Unilever has a 300 million yuan bond maturing on March 31.
Citic's initial pricing guidance was 4.125 per cent, while Mitsubishi UFJ was indicating a yield of 3.5 per cent.