China’s €4 billion bonds snapped up as limited supply draws strong response from Europe, Middle East

Issuance, which follows US$4 billion dollar note sold last month, underlines Beijing’s commitment to the further development of its offshore bond market, bankers say

Bond ‘effectively lays the ground’ for other Chinese corporate issuers to target Euro-based investors as well

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The supply of euro-denominated bonds out of China is relatively scarce as compared to that of the US dollar. Photo: AFP

Published: 6:30pm, 11 Nov 2021Updated: 10:20pm, 11 Nov 2021

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.