China is undertaking a record $6 billion sales of sovereign bonds aimed at enhancing the nation's continued interest in building an offshore market, people with knowledge of the matter disclosed.
According to sources, the Ministry of Finance expects tenors of three years, five years, 10 years and 20 years. The ministry did not respond immediately to a request for comment.
This marks China's third straight year of issuing dollar debt, and highlights the nation's campaign in creating an offshore market where its businesses and local authorities can have access to funding. A gap between 10-year and30-year securities issued in 2018 will be filled in with the 20-year note.
"It reaffirms the determination of China to develop an orderly market for Chinese issuers of offshore dollar bonds," said Anne Zhang, head of fixed income for JPMorgan Private Bank in Asia, with regards to the offer.
China's bond sale follows the country's first euro bond sale in 15 years - which saw a blowout appetite from buyers keen to snap up bonds with favorable coupons in the midst of a swathe of negative-yielding debt.
A $6 billion issue would double last year's size and triple the amount sold in 2017 when China resumed a debt issuance for the first time since 2004.
According to data compiled by Bloomberg, the Chinese dollar bond market now exceeds $740 billion and is both a key source of financing for domestic borrowers and an outlet to invest foreign-currency deposits in China.
Issuance fell in 2018 after 2017 high when the U.S.-China trade drama started to affect the financial market and weakened the yuan. This year, though, revenues have rebounded despite the weakening of U.S. treasury yields. In recent weeks, after the resumption of Sino-American trade negotiations, the yuan has also strengthened.
Based on the latest data, Chinese lenders have sold $195 billion dollar bonds so far this year. In 2017, the all-time high was $211 billion for a full year.
Builder Binge Investment's securities constitute nearly 54 percent of Chinese dollar debt, with high-yield bonds at 38 percent. Property developers this year have racked up $78.5 billion in record issuance.
Although China has the world's second-largest bond market, according to Becky Liu, head of China's macro strategy at Standard Chartered Plc in Hong Kong, it remains relatively underdeveloped in some aspects.
In Moody's Investors Service, S&P Global Ratings and Fitch Ratings, China holds the fifth-highest investment-grade rating. That's below South Korea, but placing the levels of Moody's and S&P on par with Japan.
