China Morning Missive
The Chinese Ministry of Finance has been on a tear over the past two weeks issuing bonds and raising billions in the process from global investors. What has been the most interesting aspect of this exercise, however, has been the sheer demand for Chinese paper.
There was the USD4.0billion issuance divided evenly between a 3 and 5-year tranche. Demand came in at USD118.0billion.
Then this week there was a EUR4.0billion deal this time evening split between a 4 and 7-year tranche. Here, demand came in at EUR100billion.
Demand for the Chinese bonds was so significant that the securities ended up being priced at just two basis points above US treasury bonds of a similar tenor.
It would seem as though China is one again “investable” considering that sovereign issuance had been scant and, at times, nonexistent over the past four years.
There is a greater game at play here beyond a government looking to tap investor demand. China is returning to the global sovereign debt market with the expressed purpose of resuming the campaign of deepening the offshore yield curve so as to provide pricing benchmarks for Chinese corporates. Expect to see a host of large Chinese enterprises test the global markets throughout 2026. Demand for sovereign risk is one thing. Demand for Chinese corporate risk remains a distinct unknown.
https://finance.yahoo.com/news/china-smashes-bond-sale-records-093818568.html