China starts marketing record 5 billion euros of sovereign bonds

[HONG KONG] China kicked off marketing up to 5 billion euros (S$7.4 billion) of sovereign bonds in what could be its largest-ever such deal in euros.

The Chinese Ministry of Finance set the initial price guidance for the five-year, eight-year and 12-year euro-denominated notes at 15, 22 and 33 basis points above the mid-swap rate respectively, according to a person familiar with the matter. The securities could be priced as early as Thursday (Jun 25), the person added.

China normally taps the euro debt market just once a year but it is returning earlier than usual, only seven months after its 4 billion euros bond issuance in November attracted record demand exceeding 100 billion euros. In previous years, the world’s second largest economy has typically priced euro securities between September and November, with the exception of its debut in May 2001, according to data compiled by Bloomberg.

“China is seizing a favourable window,” said Lei Zhu, head of Asian fixed income at Fidelity International. It’s well positioning ahead of potential inflation pressure and possible tightening by the European Central Bank in the second half of the year, she added.

The sale is a fresh test of global investor appetite at a time when the European Union is stepping up efforts to address its widening trade imbalance with China while avoiding triggering a new trade war. The bloc was China’s second-largest export market last year. BLOOMBERG