China’s Ministry of Finance issued $6 billion worth of dollar-denominated bonds earlier this week, less than a month after its €4 billion sale of euro-denominated notes. Both transactions were well received by investors, with the dollar bonds garnering an order book in excess of $20 billion such that China could tighten pricing from initial guidance and print twice the size of its original target.

The bonds were issued in 4 tranches, with $1.5 billion in 3-years priced 35 bps above benchmark US treasuries, $2 billion in 5-years priced 40 bps above treasuries, $2 billion in 10-years at 50 bps above treasuries and $500 million of a 20-year tranche at 70 bps above treasuries. As compared with China’s dollar bond sale in October 2018, the country was able to achieve a much lower cost of financing in this round of issuance as a result of the bond market rally this year driving bond yields sharply lower. As expected, the bulk of the bonds were placed to Chinese buyers, with banks providing strong support. This latest sovereign sale will leave China with a variety of dollar maturities of at least half a billion dollars each, due between 2022 and 2048, helping to further build out a benchmark yield curve for Chinese corporate and SOE issuers.

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