UpdateChina MOF dim sum bond sale sees hot demand

Demand for Beijing’s latest dim sum bond sale was red-hot yesterday, with most notes sold at much-lower-than-expected yields as investors in Hong Kong snapped up the government debt amid a limited supply of low-risk yuan assets.

Twelve billion yuan (HK$15.2 billion)  worth of offshore yuan bonds in six different tenures were offered yesterday, including five billion yuan of three-year bonds at 2.8 per cent, the Hong Kong Monetary Authority said.  

The yield was below market players’ expectations of between 2.85 per cent and 2.95 per cent but higher than that of the previous two auctions last year, when investors bought the three-year bonds at 2.74 per cent in November and 2.53 per cent in May.

The rest of the sale included three billion yuan of five-year bonds  at 3 per cent,  1.5 billion yuan of seven-year bonds  at 3.36 per cent,  1.5 billion yuan of 10-year bonds  at 3.39 per cent,  500 million yuan of 15-year bonds at 3.6 per cent  and 500 million yuan of 30-year bonds at 4.1 per cent.  

The total amount of dim sum bonds issued so far this year is down by  about 46 per cent from the same period last year, with offshore investors fretting over rising default risks and a slowing mainland economy, which grew at its weakest pace in seven years in the first quarter of the year.

Analysts said fund managers’ cash levels would be high after months of heavy maturity in dim sum bonds and a sluggish primary market, pushing up demand for the government notes.