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China has launched a multibillion-dollar bond offer to investors outside the country, seeking to borrow money at a price as advantageous as some of the strongest companies in America at a time of heightened tension with its peers. main trading partner.
The sale of sovereign bonds – China's second-largest sale of US bonds in one year and only the third since 2004 – includes securities maturing in five, ten and 30 years. Bankers told investors that China plans to raise $ 3 billion.
On Thursday morning in Asia, the new bonds were offered to investors at interest rates 0.5 to 0.9 percentage points higher than the rate of return on US Treasury bonds, according to the bankers who sold the deal. This is in the range of corporate links such as
Apple
Inc.
and
Microsoft
Corp.
yielded recently, according to data from the MarketAxess bond trading platform. The final price of Chinese bonds – which are not rated – should be determined later in the day.
The sale of China bonds began despite a tumultuous trading session for US stocks and bonds. The Dow Jones Industrial Average tumbled 832 points, or 3.15%, Wednesday in New York. Strong sales in the United States and Asia drove down major New York indices in Taiwan. Markets in Hong Kong and mainland China were down 3.5% to 5.5% on Thursday morning.
Earlier this week, a Chinese finance ministry official met with potential investors in Hong Kong and phoned English and Mandarin to a few hundred investors in Asia and Europe to discuss the benefits of the company. 39, purchase of Chinese bonds.
Speaking about the timing of the sale, the official said Beijing was confident that the offer would be successful, according to two people attending the meeting. The official also said that the trade dispute between the United States and China would not have as significant an impact on the Chinese economy as some seem to believe in the market, the citizens said.
Bankers and analysts said China hoped to replicate the success of last year's dollar bond sale, which had spent more than $ 20 billion in orders for the $ 2 billion worth of securities offered to investors of the whole world. This strong demand has allowed China to fix its securities at 5 and 10 years last October at a level 0.3 percentage points lower than Treasury yields.
Since then, bond investors around the world have been demanding higher returns for many assets perceived to be higher risk than US government bonds, whose returns have also risen as a result of multiple rate hikes by the Federal Reserve.
China hopes to replicate the success of selling bonds in dollars last year.
Photo:
jason lee / reuters
China, whose sovereign rating for the world's highest credit rates is three to four notches higher than that of the United States, is generally considered to have a very low risk of default because of its large reserve of credit. foreign exchange and a trade surplus. The sale of $ 3 billion bonds is also relatively modest, which will likely guarantee an oversubscription.
However, the latest offer comes as growth slows for the world's second-largest economy. The Chinese central bank has reduced the amount of cash that banks must keep in reserve four times this year. Its stock market has lost about a fifth of its value this year and the yuan has weakened by more than 9% against the US dollar since mid-April.
The country's new five-year bonds are traded at 0.5 percentage points compared to comparable treasury bills, while 10-year and 30-year bonds are initially offered at 0.65 percentage point margins, respectively. and 0.9 percentage points.
The five-year Treasury bill yield was recently at 3.001%, while the 10- and 30-year Treasury bills yielded respectively 3.165% and 3.331%, according to Tradeweb.
If the new Chinese bonds pass strong orders from foreign investors, this would be positive for Beijing and would testify to the confidence of investors in the government and the economy of the country, said Gary Zhou, director of securities investments. Fixed Income of China Securities International Asset Management in Hong Kong. . If China is able to borrow cheaply in the dollar bond market, it could also help reduce the cost of borrowing for some companies that have to tap international bond markets.
China has hired 12 underwriters, including foreign banks, to spark investors' interest in bonds. They understand
German Bank
AG
, Crédit Agricole Corporate & Investment Bank,
HSBC Holdings
PLC,
JPMorgan Chase
& Co.,
Goldman Sachs Group
Inc.
and
Standard Chartered
PLC, with
bank of China
Ltd.
and other big Chinese lenders.
Write to Manju Dalal at [email protected]
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