The Ministry of Finance has increased the size of the first treasury bond issue of the year by 17.36 billion yuan (about HK$16.16 billion) to meet greater than expected demand from retail investors. This brings the issue size to 142.36 billion yuan, or 51 per cent of Beijing's proposed treasury bond sales of 280.86 billion yuan for the year. Analysts said commercial banks underwriting the issue were required to stagger sales to October 31 to ensure funds were raised according to a timetable set by the ministry. The additional papers - sold from yesterday - are underwritten by the Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Bank of Communications. 'The extra papers will help to meet the demand of small investors, who have plenty of cash to spend but few investment choices,' said Haitong Securities bond manager Chen Lihua. Last week official media reported that more than 80 per cent of the original 125 billion yuan issue was snapped up by the end of last month, although the sale was supposed to last until the end of October. This rush, prompted by falling interest rates and the sluggish stock market, upset the ministry's schedule for matching funds raised with their intended use and forced it to issue a circular to banks to slow remaining sales. 'At a time of falling interest rates, it benefits the ministry to issue more medium- to long-term debt papers, especially since they are in demand,' said Shanghai Finance Securities bond analyst Yao Xinming. The additional debt papers have a five-year maturity, carry a coupon rate of 7.86 per cent and are non-tradeable. The original 125 billion yuan issue is made up of two tranches: 75 billion yuan of three-year notes with a coupon rate of 7.11 per cent, and 50 billion yuan of five-year notes paying 7.86 per cent. With the extra issue, five-year notes will amount to 67.36 billion yuan. Tianjin Securities deputy general manager Gui Haoming said: 'It looks like the government is focusing on non-tradeable bonds this year instead of raising more listed bonds to improve liquidity in the secondary market.' Funds raised from treasury bond issues are used to finance the budget deficit and for redeeming government debts maturing this year. About 46 billion yuan raised from this year's entire proposed issue of 280.86 billion yuan will be used for the budget and the remaining 234.86 billion yuan for redeeming past bond issues.