China seeks to raise over $3 bn in overseas dollar bond sale
BEIJING: China will seek to raise over $3 billion in its overseas issuance of sovereign dollar bonds set for late on Tuesday, an official at China’s finance ministry said.
“The size of issuance will surpass that of previous years,” the official told Reuters.
The ministry will release more information on the sovereign bond issuance, which will help improve China’s offshore bond yield curve, the official said.
It will “provide a pricing benchmark for Chinese enterprises issuing US dollar bonds,” Bank of China said in a statement on its website on Tuesday.
The Chinese lender is one of 13 investment banks mandated to lead the US dollar sovereign bond deal, according to a term sheet seen by Reuters, its third since its international debt issuance programme was revived two years ago.
Initial price guidance for the three-, five-, 10- and 20-year tranches is around 60, 65, 70 and 75 basis points above US Treasuries of the same tenors, respectively, people familiar with the matter said.
“The pricing looks wider compared to previous offerings,” said Wei Liang Chang, a macro strategist with DBS Bank Ltd in Singapore.
“Trade uncertainty and China’s growth slowdown have induced a slight increase in the risk premium, but China’s offering indicates that it still holds fast to its strategy of deepening the dollar-bond market.”
The deal comes after a market rally this year that has driven global bond yields sharply lower, significantly decreasing the cost of financing compared with its previous dollar issuance in October 2018.
US 10-year Treasuries yielded 1.76% on Tuesday, according to Refinitiv data, nearly 150 basis points below its highs last October when the sovereign issuer last tapped the dollar bond market.
“From a tactical financing standpoint, now is an opportune time to obtain some relatively inexpensive financing,” said Alex Kozhemiakin, head of emerging markets debt at Macquarie Asset Management in New York.
In 2017, China launched its first US dollar bond in 13 years.
That deal raised $2 billion while a separate transaction in 2018 raised another $3 billion.
China sold its first eurodenominated bond in 15 years earlier in November, raising $4.4 billion and analysts believe the European markets will become a greater source of funds for the mainland in the future.
The total Chinese dollar bond market now tops $740 billion, according to data compiled by Bloomberg, and issuance so far this year has run at a record pace. On a single day in early November, some six property developers were selling dollar securities.
With the latest sale, China will have dollar securities outstanding with maturity dates ranging from 2022 to 2096 (the result of a small century bond sold in the 1990s).