China sells first sovereign bond at negative interest rate, taking advantage of record low borrowing costs to raise capital

Name: What happened at the Chinese Communist Party’s major policy meeting, the fifth plenum?
Uploaded: 2020-11-19T02:46:02.000Z
Duration: 3 min 5 s
Description: What happened at the Chinese Communist Party’s major policy meeting, the fifth plenum?

China’s Ministry of Finance sold US$4.74 billion of euro-denominated sovereign debt on Wednesday

Sale included China’s first negative-yielding bond since returning to international debt markets in 2017

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A worker at a factory of the Shaanxi Automobile Holding Group in Xi'an, capital of northwest China's Shaanxi Province on November 2, 2020. Photo: Xinhua

Chad Bray

Published: 10:46am, 19 Nov 2020Updated: 10:34pm, 19 Nov 2020

China has sold the nation’s first negative-yielding sovereign bond, the latest to take advantage of the record low cost of money amid the global coronavirus pandemic to finance its borrowing.

The Ministry of Finance sold about €750 million worth of a five-year note bearing an interest rate of -0.15 per cent overnight on Wednesday, the smallest tranche of a €4 billion (US$4.74 billion) sale of euro-denominated debt.

The order book attracted €18 billion in bids, or 4.5 times the entire offer. The government sold €2 billion of a 10-year tranche, and €1.25 billion in the 15-year tranche, according to a term sheet seen by South China Morning Post.

“Similar to last year, both the 10- and 15-year tranches attracted a very strong order book from global investors, offering a positive yield for China sovereign risk which remains a very compelling story,” said Sam Fischer, head of China onshore debt capital markets at Deutsche Bank.

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What happened at the Chinese Communist Party’s major policy meeting, the fifth plenum?

The international bond sale – China’s sixth offer in four years and the second euro-denominated issue in two years – was led by three state-owned lenders and nine foreign banks, including BofA Securities, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase and Standard Chartered. Including this week’s sale, the Chinese government has raised US$27 billion and €8 billion since its return to the global bond market in November 2017.