(April 24): China’s first sale of ultra-long special sovereign bonds this year drew solid demand, with yields coming in below prevailing market levels.
The Ministry of Finance issued 85 billion yuan (US$12.5 billion or $15.92 billion) of 30-year notes on Friday, the largest single offering at that tenor on record, according to data compiled by Bloomberg. It also sold 34 billion yuan of 20-year bonds.
The 30-year bonds were sold at an average yield of 2.2%, according to a trader who participated in the auction, slightly lower than secondary-market levels of around 2.3%. The 20-year notes were priced at 2.2%, the trader added, declining to be identified as they’re not authorised to speak publicly.
The issuance is part of China’s 1.3 trillion yuan ultra-long special bond quota approved in March. Unlike regular sovereign debt, these bonds are earmarked for specific spending, such as on infrastructure and subsidies for consumer goods and business equipment, and are not included in the official deficit. They’ve been a regular off-budget funding tool since 2024 to aid the economy.
The strong demand reflects ample liquidity in the financial system. Recent central bank cash injections have kept funding conditions loose to hold down borrowing costs and ensure smooth government financing as authorities lean more on fiscal support. That backdrop has bolstered expectations the bond rally — which has seen Chinese debt outperform peers — may have further to run.
Chinese bonds were little changed following a recent rally. Yields on 30-year cash bonds held at 2.23%, while futures contract on those notes rose 0.1%.
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