Chinese Finance Ministry bond a hit with institutions
First round of tendering worth 16 billion yuan more heavily subscribed than last year's offering, despite having a lower coupon
China's Ministry of Finance yesterday concluded its tender offer for tranches of its 28 billion yuan (HK$35 billion) bond, drawing strong demand for the 16 billion yuan institutional offer.
The bond was more heavily subscribed than the ministry bond tendered last year despite the fact that this year's offer was bigger and more tightly priced.
The seven billion yuan, three-year tranche - the largest piece of the offer - was 3.3 times subscribed with the coupon fixed at 2.4 per cent. Last year's tendering in June saw a three-year, five billion yuan tranche covered 2.14 times, with a coupon of 2.71 per cent.
The ministry split the bond into three, five, seven, 10, 15 and 20-year tranches. Most of the bidding was for the three-year part, drawing 23.4 billion yuan from institutions.
"What's interesting is how the distribution of paper is still massively biased towards the front end of the curve, with the three-year area representing half the total issuance," said Guy Stear, head of Asia research for Societe Generale.
This was despite the fact that the longer-dated tranches offered substantially more yield, particularly when compared with the flat yield curve seen on the 2013 bond.