Investors snapped up € 4 billion bonds issued by China’s Ministry of Finance on Wednesday, attracting an order book more than four times the original size made available to them in what is the biggest euro-denominated bond issuance in the Asia-Pacific region this year. It is also the Chinese government’s third annual issuance since it restarted its sovereign euro bond programme in 2019, which came 15 years after it last sold a € 1 billion issue in 2004. This week’s issuance also came on the heels of a US$4 billion dollar bond it sold just last month, which underlines Beijing’s commitment to further develop its offshore bond market, bankers said. Sold in three tranches comprising three-year, seven-year and 12-year bonds, the € 4 billion notes attracted investors primarily from Europe, the Middle East and Africa, bankers said. The issuance attracted bids from banks, sovereign supranational agencies, asset managers and insurance firms, they added. “The supply of euro-denominated bonds out of China is relatively scarce as compared to that of the US dollar,” said Christophe Cretot, the Asia-Pacific head of debt origination and advisory at Credit Agricole CIB, which was one of the bookrunners for the deal. “This effectively lays the ground for other Chinese issuers to benefit from a bigger pocket of demand [from Euro-based investors] in the future.” The € 1.5 billion three-year tranche was sold at a negative yield of minus 0.192 per cent, which means that investors could incur a loss if they hold this bond to maturity. That still compares favourably to Germany’s three-year sovereign bond yield, which stands at minus 0.73 per cent. “Despite the three-year tranche being issued at a negative yield, its bond yield still has a 50 basis points premium compared to the German bond of the same maturity and, therefore, is still attractive for Euro-based investors,” said Zhang Xing, managing director and Hong Kong head of fixed income, investment banking at China International Capital Corporation, a joint lead manager of the deal. The € 1.5 billion seven-year bond was issued at 20 basis points above the mid swap rate, while the € 1 billion 12-year bond was priced at 52 basis points above the mid swap rate, bankers said. By maintaining its presence in the euro bond market, bankers said the Ministry of Finance was deepening and expanding its connection with the euro investor base, as seen by the fact that new investors have bid for this week’s issuance. “Through the issuance, the Ministry of Finance can also maintain its dialogue with international investors, and convey to them that the Chinese economy has been steadily recovering from the Covid-19 pandemic,” Zhang said. China’s economy grew at 4.9 per cent year on year in the third quarter, missing market expectations and down from the 7.9 per cent recorded in the second quarter. The government has set a target of “above” 6 per cent for the whole of 2021. With such regular, annual issuances at various tenors, the government has built a comprehensive and liquid fundraising benchmark for other Chinese issuers, such as companies, to tap the euro bond market, bankers said. Year to date, Chinese companies have raised an equivalent of US$7.5 billion in euro-denominated bonds over 18 issuances, with the value up 40 per cent compared to the same period a year ago, data from Refinitiv shows. “We believe the euro capital market still has significant untapped potential,” said Credit Agricole’s Cretot.