China’s $6b dollar bond gets orders of about $20b

Strong demand allows sovereign to cut pricing by 25 bps

China raised $6 billion in its latest bond offering in the currency, after pulling in about $20 billion of investor orders for the sale, according to people familiar with the matter.

The nation sold $1.5 billion of three-year notes, $2 billion apiece of five and 10year notes and a $500 million 20-year tranche. The strong demand allowed the sovereign to cut pricing by 25 basis points on the shortest tranche to 35 basis points above US Treasuries, according to a person with knowledge of the sale.

Wonnie Chu, managing director of fixed income at GaoTeng Global Asset Management Ltd., predicted that the premiums would come down in the final pricing.” We expect there will be strong investor appetite for the deal on demand for quality issuers and we see mainly bank support for sovereign,” she said before deal’s pricing.

The sale will help to build out a benchmark yield curve for Chinese issuers, which range from private companies to local authorities. “The combination of short and long-dated tranches, as well as the decision to access both euro and US dollar, provides a range of useful benchmarks for Chinese entities looking to access global debt markets in the months ahead,” said Sean McNelis, co-head of debt capital markets for Asia-Pacific at HSBC. HSBC was the lead manager for the sale.

Orders for a dollar bond offering from China last year showed diminished interest from US-based investors amid the escalation in the trade war. The bulk of dollar bonds sold by Chinese issuers is typically taken up by Chinese buyers — they’re a convenient place for banks to invest their foreign-currency deposits.