Hong Kong raises US$5.8b in its largest-ever green deal

HONG Kong sold the equivalent of US$5.8 billion in green bonds on Wednesday (Jan 4), as debt markets roared back to life amid a global rush of deals.

Sources said the bonds were denominated in three currencies, with US$3 billion of US dollar bonds across four tenors, a 1.25 billion euro (S$1.8 billion) two-tranche note, and a 10 billion offshore yuan (S$1.94 billion) portion. They asked not to be named as they were not authorised to discuss the matter.

Investors sent in bids of more than US$25 billion for the US dollar notes, said the sources. This allowed the issuer to trim pricing on the bond, even as it saw strong reception to its new green notes in the two other currencies.

Another person familiar with the matter said that final yields of 3 per cent and 3.3 per cent had been set on the two- and five-year offshore yuan bonds. This was as much as 50 basis points below the initial guidance.

Hong Kong sold some US$3 billion of US dollar and euro-denominated green bonds in November 2021. Days later, it issued its first such note in yuan. The government also raised HK$20 billion (S$3.4 billion) in May 2022 from its first green bond for retail investors. This was part of the city’s efforts to become a sustainable-finance hub.

The start of 2023 has seen issuers globally rush to sell debt, as borrowers look to take advantage of falling bond yields over the past couple of months. Historically, the start of each year is a busy period for new bond sales. For Asian issuers, the US dollar’s late-2022 pullback proved opportune to sell bonds denominated in the greenback.

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Amid the latest deal rush, the Hong Kong Airport Authority began marketing a multi-part debt deal as it prepared to jumpstart operations with reduced travel restrictions. The deal included five-year green notes.

The global bond market entered a rare bear market last year, as central banks led by the US Federal Reserve sharply raised interest rates to fight climbing inflation. But the market recovered somewhat by the end of 2022. Last week, spreads on investment-grade US dollar bonds in Asia outside Japan reached their narrowest level in three months. BLOOMBERG