China could issue its first dollar bond since October 2004 in Hong Kong as early as Thursday, according to sources. The Ministry of Finance will hold an investor presentation for the planned US$2 billion sovereign issue on Wednesday, said sources who did not wish to be named. It has hired 10 joint lead-underwriters and joint bookrunners, including four international banks – Citigroup, Deutsche Bank, HSBC and Standard Chartered Bank for the unrated senior bonds. The Chinese joint lead-underwriters are Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, Industrial & Commercial Bank of China and China International Capital. The issue comprises equal tranches of five-year and 10-year notes. Governments typically pay a fee to international credit agencies to obtain a rating to provide investors with an assessment of the quality and risk of their debt. However, Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s did not rate the bonds, according to a statement by Bank of China on its website. While many local-currency denominated sovereign bonds such as from Australia and Thailand have been unrated in the past two years, all Asian governments have rated their US dollar denominated bonds, according to data from Thomson Reuters. Regulator to set benchmark for companies to issue green bonds in Hong Kong Some unrated bonds expose investors to elevated levels of risk, while other types of unrated bonds are among the safest investments on the market. Weak companies such as those of sub-investment grade may need to market their debt at higher interest rates for their unrated bonds than rated debt. However, strong and diversified international response for China’s new issue is still expected given its rarity and growing demand for US dollar assets. In any case, plain vanilla bonds are generally viewed by the market as owning the same credit rating of the issuer, so the pricing of China’s debt is unlikely to be impacted by the bond being unrated. Although China’s sovereign rating was downgraded by one notch earlier this year by S&P and Moody’s to A+ and A1 respectively, those rating levels still suggest China as being high quality. The sovereign bonds will help to establish a benchmark for Chinese corporate issuers, amid a growing need to raise foreign currency funds for overseas expansion, under President Xi Jinping’s ambition of a modern Silk Road. Last year, Chinese institutions and companies sold more than 250 dollar bonds, raising some US$120 billion.