China's Ministry of Finance Successfully Issued 4 Billion Euro-denominated Sovereign Bonds, More than Four-times Oversubscribed

Published: Nov. 11, 2021 at 3:35 AM AKST

BEIJING, Nov. 11, 2021 /PRNewswire/ -- China's Ministry of Finance ("MoF") issued 4 billion EUR-denominated sovereign bonds in 3, 7 and 12-year tranches in the Hong Kong Special Administrative Region. This marks the third consecutive annual issuance since the country restarted the issuance of sovereign euro-bonds in 2019. On the pricing day, three tranches were announced with an initial price guidance of MS+20bps area, MS+40bps area and MS+65bps area, attracting multiple orders from many high-profile international bond investors, reaching a 4.3-times oversubscription limit with the final order book above EUR 17.2 billion. The final price for the 3-year tranche was tightened to MS+0bps; the 7-year tranche was tightened to MS+20bps; and the 12-year tranche was tightened to MS+52bps. The 3-year tranche achieved a negative yield again and the issue spread fell to 0bps for the first time. CICC acts as the Joint Lead Manager and Joint Bookrunner.

Wang Sheng, member of the Management Committee and Head of Investment Banking at CICC, said that "the issuance is poised to set a pricing benchmark for overseas Chinese companies' euro financing, diversifies investors' options to invest in China's economy and further strengthens the connections and cooperation between China and European markets."

On October 19, MoF issued 4 billion USD-denominated sovereign bonds in Hong Kong, achieving a record low in issue spreads across all tranches for USD sovereign bonds in China. The issue spread for the 3-year tranche fell below 10bps for the first time, and the yield approached that of US Treasuries of the same maturity. After the issuance, the performances in the secondary market have remained strong. On October 11 and 12, the Shenzhen city government and Guangdong provincial government issued offshore RMB local government bonds of 5 billion yuan and 2.2 billion yuan in Hong Kong and Macao respectively, achieving a zero-to-one breakthrough in the issuance of offshore bonds by local governments in mainland China.

"CICC has underwritten multiple issuances of China sovereign bonds and local government bonds in different currencies this year," Wang Sheng said. " They remained very attractive to international investors and the successful issuances demonstrated confidence in China's growth prospects and sustainability. Undoubtedly, the opening-up and connections to global financial markets create a win-win situation."

In recent years, with the increased pace of Chinese enterprises going abroad, China keeps active in offshore bond markets. Facing the tradeoff between stabilizing economic recovery and controlling inflation, the Federal Reserve's expected policy tightening has intensified the volatility in debt capital markets, and benchmark US Treasury yields show an upward trend. Since the beginning of this year, the issuance volume of Chinese offshore bonds has declined slightly year-on-year. However, the structure has continued to optimize, with a more diversified industry distribution of issuers and further improved corporate debt structure. According to the National Development and Reform Commission, in the first three quarters of this year, a total of 261 Chinese enterprises issued 465 medium- and long-term bonds abroad, with a total amount of USD 158.76 billion. Accounting for 50.2%, Chinese enterprise has continued to maintain its position as the top issuer of Asian G3 bonds. It is worth noting that Chinese enterprises have become prolific issuers in offshore green, social, sustainability and sustainability-linked bonds (GSSS bonds) this year, actively responding to the goals of "Carbon Emission Peak and Carbon Neutrality". In the first three quarters, Chinese enterprises issued 64 GSSS bonds abroad, with a total amount of USD 22.6 billion, up 163.1% year-on-year, based on NDRC's data. CICC has completed multiple benchmarking deals, ranking top in Chinese offshore bond underwriting[1].

Meanwhile, in September, the Southbound Bond Connect was launched, marking that the two-way financial opening-up of China has taken another step forward. " The Southbound Bond Connect will be conducive to improving relevant institutional arrangements in the two-way opening-up of China's bond market and offering more investment channels in the international financial markets for mainland Chinese investors," Wang Sheng said.

On October 29, China's government bonds were officially included in the FTSE World Government Bond Index (WGBI), marking the inclusion of China's government bonds into the three major global bond indices - Bloomberg Global Aggregate Index, JPM GBI-EM Global Diversified Index and FTSE World Government Bond Index (WGBI). After years of development, China is currently the world's second-largest bond market[2]. "The inclusion has prompted trading momentum and boosted the liquidity of Chinese bonds in the international bond markets," Wang Sheng added.

About China International Capital Corporation (CICC)

China International Capital Corporation Limited (CICC, 03908.HK,601995.SH) is a top tier investment bank, founded in China in 1995, providing first-class financial services to corporates, institutions and individuals worldwide. As the first international joint-venture investment bank in China, CICC plays a unique role to support China's economic reforms and liberalization through providing  comprehensive one-stop domestic, overseas, and cross-border financial services including investment banking, equities, FICC, asset  management, private equity investment, wealth management and research. Headquartered in Beijing, CICC has over 200 branches in Mainland China and offices in Hong Kong SAR, Singapore, New York, London, San Francisco, Frankfurt and Tokyo. For more information about CICC, please visit www.cicc.com

[1] Bloomberg Offshore China Bonds League Tables Q3 2021

[2] China's official government website : http://www.gov.cn/shuju/2019-06/22/content_5402553.htm

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