China’s euro-denominated sovereign bonds sale sees strongest demand in six years
The offering is around 12.5 times oversubscribed, attracting orders exceeding 50 billion euros
[HONG KONG] China’s up to 4 billion euros (S$6 billion) euro-denominated sovereign bonds drew the strongest demand for any such notes in at least six years, in the latest sign of growing investor appetite for the country’s debt offerings.
The offering was around 12.5 times oversubscribed, attracting orders exceeding 50 billion euros, as of noon on Tuesday (Nov 18) in Hong Kong, according to a person familiar with the matter. That was the highest demand since at least 2019 for China’s euro-denominated bonds, in terms of the orderbook, Ministry of Finance data showed.
China’s Ministry of Finance is seeking to price the four-year part of the dual-tranche offering at about 28 basis points above the mid-swap rate, said the person, who requested anonymity discussing private matters. The so-called initial price guidance for the seven-year portion is around 38 basis points, the person added.
The bonds are expected to be priced later on Tuesday.
The euro offering comes on the heels of China’s successful US$4 billion dollar-denominated bond sale about two weeks ago, which drew orders of almost 30 times its deal size. The robust demand helped the country price the shorter-tenor notes in the deal in line with Treasuries, despite the US having a stronger credit rating and a much bigger role in the global financial system.
China is signalling confidence in its creditworthiness and its intent to position Chinese sovereign debt as a benchmark in global markets, Eugene Ng, head of debt capital markets for Greater China at HSBC, one of the financial firms arranging the sale, said last week regarding China’s US dollar bond sale.
The US dollar bond issuance gave the euro deal a confidence boost as the participation from European investors shows a lot of supporters across Europe, Ng added.
Central banks, sovereign wealth funds, and insurers secured more than 40 per cent of allocations in the recent US dollar sale – up from 11 per cent last year – while Asian investors’ share fell to about 50 per cent from 68 per cent. The shift underscores growing confidence among global reserve managers in China’s credit profile.
“Global investors are snapping up Chinese sovereign bonds as part of a bigger play for diversification,” said Lei Zhu, head of Asian fixed income at Fidelity. “Euro assets are in high demand thanks to strong currency gains, tighter credit spreads, and attractive returns.”
The typically annual fundraising exercise in global debt markets is part of Beijing’s goal to build deeper sovereign yield curves that can serve as benchmarks for Chinese companies to price their own bonds. This is particularly relevant in the euro market, where liquidity remains relatively thin for Chinese borrowers. BLOOMBERG
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