China’s US$1.3 billion of ‘dim sum’ bond sale overbought as appetite grows for yuan debt

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The 9 billion yuan (US$1.3 billion) tranche of Ministry of Finance bonds, offered with tenures of two years, three years and 10 years, were overbought by 2.4 times

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The Exchange Square in Hong Kong. Photo: Xiaomei Chen.

Enoch Yiu

Published: 6:42pm, 14 Aug 2024Updated: 6:44pm, 14 Aug 2024

The Chinese government’s fourth sale of yuan-denominated sovereign bonds in Hong Kong this year was vastly overbought, as investors rushed to take advantage of the yield gap with the mainland through a transborder investment channel with the city.

The 9 billion yuan (US$1.3 billion) tranche of bonds, offered with tenures of two years, three years and 10 years, attracted 30.4 billion yuan of bids from investors, according to the Hong Kong branch of Bank of Communications (Bocom), the sole agent of the sale.

The yield on the so-called dim sum bonds were 1.9 per cent, 2 per cent and 2.38 per cent respectively, the Ministry of Finance said in a separate statement in Beijing.

“Amid the current volatile interest rate environment, the yuan has become an important choice for international investors for its stability and resilience,” said Bocom, the sole sales agent for 15 consecutive years. “This successful issuance reflects international investors’ recognition in China’s sovereign creditworthiness as well as their confidence in the sustainable and stable growth of Hong Kong economy.”

The uptake augurs well for the finance ministry, which has announced its plan to sell six batches of bonds to raise 55 billion yuan this year in Hong Kong. The government raised 12 billion yuan in March, 11 billion yuan in June and 9 billion yuan last month.

The sale is another step towards the global use of the yuan, also called the renminbi, which catapulted to become the fifth member of the Special Drawing Rights (SDR) of the International Monetary Fund in October 2016, alongside the US dollar, the euro, the yen and the pound sterling.

The SDR is an international currency reserve created by the IMF in 1969 to promote trade, increase liquidity and supplement member countries’ official reserves during financial crises.