China bids for 40 billion dollars in bond issuance

China, which recently unveiled plans to boost its economy, has received more than 40 billion dollars in bids for its first dollar bond issue since 2021, as Bloomberg reveals. 

This is 20 times the amount of bonds on offer, and is one of the reasons why spreads narrowed during the sale. The US media estimates that the country will raise 2 billion dollars in three- and five-year securities at one and three basis points, respectively, over US Treasuries. They initially traded at spreads of around 25 and 30 basis points. 

Although the bonds are available to investors around the world, it was announced last week that they will be sold in Saudi Arabia, an unusual location, as cities such as London, New York and Hong Kong are normally chosen for such transactions. 

The choice of the Saudi Kingdom comes amid efforts to boost economic ties, such as the doubling of investment in Saudi Arabia by China's largest steel producer.

‘It is in line with the growing connections between the two countries,’ said Ting Meng, Asia credit strategist at Australia & New Zealand Banking Group. ‘The bond has the same format as previous ones, but there could be more Middle Eastern investors. The final pricing could be flat or even negative relative to US Treasuries,’ he added. 

According to an earlier bond offering document seen by Bloomberg, the debt will be traded on Dubai's Nasdaq and listed on the Hong Kong stock exchange.  

China sold 2 billion euros (2.1 billion dollars) of notes in Paris in September, its first sale of euro-denominated bonds in three years. Last week, the finance ministry announced a 1.4 trillion dollar bailout programme for debt-ridden local governments, although it failed to stimulate domestic demand.   

Bank of China, Bank of Communications, Agricultural Bank of China, BofA Securities, China Construction Bank, China International Capital Corporation, Citigroup, Crédit Agricole CIB, Deutsche Bank, First Abu Dhabi Bank, Goldman Sachs (Asia) L.L.C., HSBC, ICBC, J.P. Morgan, Mizuho and Standard Chartered Bank are organising the sale.