$ 1.24 billion RMB bonds auctioned in HK

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A woman shows banknotes and coins included in the 2019 edition of the fifth renminbi series. [Photo/Xinhua]

This year’s first batch of sovereign bonds is part of the planned total issuance of 20 billion yuan

China’s finance ministry will issue 8 billion yuan ($ 1.24 billion) of renminbi-denominated sovereign bonds in the Hong Kong offshore market, and primary auctions will begin Thursday morning, the ministry said on Wednesday.

This is the first batch of RMB sovereign bonds of the year that the central government will issue in Hong Kong. The Ministry of Finance plans to issue sovereign bonds in RMB for a total amount of 20 billion yuan this year.

For the first time in three years, the central government will issue 10-year RMB sovereign bonds for 1 billion yuan. The new two-year bonds will amount to 5 billion yuan and the new five-year bonds to 2 billion yuan, the ministry said.

Since the beginning of this year, the size of RMB-denominated deposits in Hong Kong has steadily increased. As 21.4 billion yuan of RMB sovereign bonds mature this year, the 20 billion yuan issue, up 5 billion yuan from last year, will meet market demand. This should help strengthen Hong Kong’s status as an international financial center, the ministry said.

Analysts said China has optimized its policies and procedures for issuing RMB-denominated sovereign bonds in offshore markets in recent years.

For example, the central government encouraged the Hong Kong Special Administrative Region government to clarify that institutional investors are exempt from income tax. It also included RMB-denominated T-bills in the scope of high-quality liquid assets, which strongly supported bond issuance and circulation, analysts said.

The central government started selling RMB-denominated sovereign bonds in Hong Kong in September 2009. By the end of August this year, the central government had issued sovereign bonds denominated in RMB for a total amount of 218 billion. yuan in Hong Kong, according to ministry data.

In addition, such bonds were issued in London for 3 billion yuan and in Macau for 2 billion yuan. The total outstanding amount of RMB-denominated sovereign bonds in offshore markets reached 50.1 billion yuan in August, according to the data.

A Standard Chartered Bank research report released on August 26 said this year’s auction of RMB-denominated sovereign bonds in offshore markets should be welcomed by global investors, thanks to the strong outlook for the Chinese yuan, the scarcity of supply, the low yields on US Treasuries and the likelihood of a more proactive economic policy in China in the second half of the year.

Some global institutional players told the China Daily on Wednesday that they “expected so much” from the first batch of issues, as the move will offer more high-liquidity and qualified RMB-denominated assets, which are attractive due to the relatively higher yields. students.

Additionally, the FTSE World Government Bond Index, or WGBI, will include Chinese Treasuries at the end of October, further persuading global investors to invest in RMB-denominated sovereign bonds and improving secondary market liquidity. , according to major sources said the financial institutions.

Investors, they said, expect the launch of South Connect of China’s Bond Connect program to expand investor reach into the Hong Kong RMB-denominated bond market and increase the liquidity of RMB-denominated bonds to overseas and secondary market transaction volume.

The South Connect program is expected to result in a significant increase in the participation of Chinese entities in the international bond market in the coming years, not only as investors but also as issuers, said Becky Liu, head of macro strategy. for China at Standard Chartered Bank.

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