Panda bond coming soon to diversify sources of funding

Quebec is working toward its first sale of debt denominated in China’s currency, with an issue likely months away, Finance Minister Carlos Leitão said.

Canada’s second biggest provincial issuer is leaning toward selling so-called panda bonds, which are denominated in yuan and sold in mainland China, to diversify its sources of funding, Leitão said Thursday.

British Columbia, which counts a sizable population of Chinese origin, is the only Canadian province to have tapped the panda bond market so far.

A sale of panda bonds “will happen in the short term,” Leitão said in a telephone interview. “I can’t say exactly how long it will take, but the regulatory and bureaucratic process is under way. It’s not a matter of years, it’s a matter of quarters.”

Montreal-based National Bank of Canada became the first North American bank to issue debt in China’s domestic market and has issued two bonds totalling 4.1 billion yuan (US$650 million) since 2016.

Leitão met with Chinese bank officials and investors during a trip to Asia in January, and there is mutual interest in making a sale happen, he said. He declined to say whether the province has already picked banks for a panda bond issue.

Chinese authorities “are very interested in having issuers of our quality,” Leitão said. “British Columbia is already there, and they want even more issuers of this calibre.

“We are interested because we think the Chinese bond market will grow rapidly. It will give us another avenue for the next five, 10 or 15 years.”