Macroscope | Beijing sends corporate China a €4 billion message: diversify away from US dollar debt
- China has capitalised on a low-yield environment in Europe to issue euro-denominated government bonds cheaply. It is also setting an example to Chinese companies, in the hope of weaning them off dollar-denominated debt dependency
Everyone loves a good deal. Last week saw an enthusiastic market response to China’s issuance of its first euro-denominated government bonds for 15 years. But this was more than just a successful bond launch.
On November 5, China sold €4 billion (US$4.4 billion) in a sovereign issuance with three separate maturities: €2 billion in seven-year notes, and €1 billion each in 12-year and 20-year bonds.
The offer was well oversubscribed, attracting bids of almost €20 billion, according to Bloomberg. The seven-year note was priced at 99.5 to a yield 0.197 per cent, the 12-year at 98.639 for a yield of 0.618 per cent, and the 20-year at 98.603 to a yield 1.078 per cent, according to Reuters.
While these yields might not look hugely appealing on the face of it, they are in positive territory. It’s worth noting that the equivalent yield on a 10-year German government bond that very day was minus 0.32 per cent.