China Presses on with $6B Dollar Debt Sale | Wibest Broker

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China trade agreement, commodities

China is pushing through with a dollar bond sale amid uncertainties over U.S. elections and tensions with Washington.

It is again looking to sell dollar notes with three, five, 10 and 30-year maturities. A number of the shorter-dated bonds have lower premiums than in 2019. That was during the initial marketing phase of China’s last dollar bond sale.

For the first time, the Ministry of Finance is opening up its bond sale to a broad pool of U.S. investors. This is potentially diversifying its investor base. Moreover, it sets aside concerns of decoupling in credit markets. 

The agreement is about to incorporate China’s debut issuance of 144A notes. It’ll also include previously sold Regulation S senior bonds. 

This will allow a wider range of potential international investors. It’s wider compared to last year’s jumbo global offering of $6 billion dollar bonds and 4 billion euro notes.

The 144A issuance proves that China is keen to market its USD bonds globally, including to U.S. investors. This was according to Chang Wei Liang, a macro strategist at DBS Bank Ltd. in Singapore. 

Liang also said that China has taken a practical approach to deepen and liberalize its financial markets. This is likely to continue with or without political tensions with the U.S., he added.

Business-as-usual Approach for China

The fresh sovereign debt sale happens this week. This is while uncertainties before the U.S. elections in November are beginning to beset investor sentiment.  According to analysts, issuing the notes in October helps avoid potentially less receptive market conditions.

China’s approach is contrary to rising concern about a decoupling between the world’s two largest economies. At its 2017 resumption of dollar-debt sale, the Ministry of Finance said it’d help build a benchmark yield curve for Chinese issuers. These issuers range from developers to local governments.

Initial Pricing

China is selling notes with tenors of three, five, 10 and 30 years. This is consistent with an individual conversant to the matter. 

To note, the initial guidances are three-year bonds: +50bp area over treasuries and five-year bonds: +60bp area over treasuries. Furthermore, 10-year bonds: +75bp area over treasuries and 30-year bonds: +110bp area over treasuries.

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