Chinese government’s offshore yuan bond sale in Macau nets US$430 million after drawing bids worth twice that
- Wednesday’s issuance, the second offshore yuan bond offering in Macau, included two tranches of two- and three-year bonds
- Sale marks a step forward in Ministry of Finance’s effort to develop the offshore bond market while also diversifying the casino hub’s economy
China’s Ministry of Finance (MOF) successfully sold two tranches of offshore yuan bonds totalling 3 billion yuan (US$430 million) in Macau on Wednesday, marking a step forward in its effort to develop an offshore yuan market.
The latest issuance, comprising a two-year tranche of 2 billion yuan and a three-year tranche of 1 billion yuan, received bids amounting to twice the total available for investors, according to a statement from the MOF. The two tranches pay yields of 2.2 per cent and 2.28 per cent, respectively.
“We see an increasing array of investors interested in Macau’s offshore yuan bond, with participation by institutions from South Korea and several Portuguese-speaking countries,” said Stephen Ieong Chi Kuong, managing director at Bank of China Macau, the sole global coordinator for the issue.
The latest yuan bond issuance should help the former Portuguese colony, known traditionally as a casino hub, to attract “a greater number of bond issuers and international investors to participate in its bond market development”, the government said in a press release issued in late August.
More Chinese issuers are showing interest in Macau, according to David Yim, regional head of capital markets for Greater China and North Asia at Standard Chartered, which serves as one of the bookrunners of the deal.
“Many Chinese corporates have started issuing bonds either in US dollars or yuan since the MOF’s inaugural issuance, so Macau’s bond market has definitely developed over the past three years,” Yim said.
The solid demand seen on Wednesday, which came despite the yuan having dropped by more than 9 per cent to a two-year low against the US dollar, has also fuelled hopes that foreign investors will continue to increase their allocations into Chinese sovereign debt.
After five straight months of net selling, foreign investors’ appetite for Chinese bonds returned in July, as foreign holdings of Chinese government bonds rose by 3.3 billion yuan in July to 2.32 trillion yuan, data from China Central Depository & Clearing shows.