(Feb 11): China sold yuan-denominated sovereign bonds in Hong Kong at the lowest yields in more than a decade, signalling stronger demand for its debt and offering support to Beijing’s push to expand its currency’s global use.
Beijing sold 14 billion yuan of debt in its first Hong Kong auction of the year and the offering was oversubscribed 3.94 times, the Ministry of Finance said on Wednesday (Feb 11). Yields were offered at the lowest since at least 2013 for two-, three- and five-year notes, according to data compiled by Bloomberg.
The sale bolsters Beijing’s efforts to promote the currency’s wider use at a time when investors are seeking to diversify away from the dollar. The strong demand coincides with a rebound in China’s onshore bond market, where 10-year yields slid to a five-month low on Wednesday.
“The offshore yuan yield curve has moved closer to the onshore curve and no longer carries a yield premium,” said Oversea-Chinese Banking Corp head of foreign exchange and rates strategy Frances Cheung. “Offshore yields are likely to move more in tandem with onshore levels, which may also act as a floor.”
The two-year bond was issued at a yield of 1.38%, while three-year and five-year debt were sold at interest rates of 1.4% and 1.57% respectively.
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The issuance on Wednesday also included 10-year and 30-year maturity bonds. Ample liquidity supported by central‑bank injections and expectations of further monetary easing are helping anchor yields on Chinese bonds.
Strong outbound investment demand from onshore investors has also buoyed the so‑called dim sum bond market, said Jeffrey Zhang, an emerging markets strategist at Crédit Agricole CIB. “Improving depth and breadth in the offshore yuan bond market is attracting a wider range of borrowers to use the yuan as a funding currency.”
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