(Bloomberg) -- China tightened pricing on its first bond offering in Europe’s common currency since 2004 after pulling in nearly 20 billion euros ($22 billion) of investor orders.
The sovereign priced four billion euros of notes across seven, 12 and 20-year maturities, according to people with knowledge of the sale, who asked not to be identified as they aren’t authorized to speak about it publicly. The most popular tranche was a 2 billion-euro seven-year note that received more than 9.25 billion euros of investor bids. Those notes priced at 30 basis points above midswaps and as much as 20 basis points inside an initial target, the people said.
The Ministry of Finance has returned to the euro market as attractive rates drive a flood of issuance in the currency.
“Issuing in euros allows the MOF to diversify its funding sources and investor base, which in the context of prolonged trade tensions with the United States is probably a prudent strategy,” said Todd Schubert, head of fixed-income research at Bank of Singapore Ltd.
| Tranche terms | Final spread | Price tightening | Investor orders |
|---|---|---|---|
| EU2b 7Y | MS +30bps | 15/20bps | Above EU9.25b |
| EU1b 12Y | MS +40bps | 20/25bps | Above EU6.25b |
| EU1b 20Y | MS +58bps | 17/22bps | Above EU4b |
Some 3.7 billion euros of the combined order book came from the joint lead managers on the deal, the people with knowledge of the matter said.
Average yields on investment-grade euro bonds are below 0.5%, close to a record low level of 0.23% reached in late August, according to a Bloomberg Barclays Index.
Investors are watching for concrete steps toward a thaw in trade tensions, with sentiment improving on expectations that Donald Trump and Xi Jinping will soon sign the first phase of a deal.
China also plans to sell dollar bonds at the end of the month. If completed, that sale would mark the nation’s third sovereign issuance since 2017, when it resumed such offerings after a 13-year hiatus.
The sovereign hired Bank of China Ltd., Bank of Communications Co., China International Capital Corp., BofA Securities, Citigroup Inc., Commerzbank AG, Crédit Agricole CIB, Deutsche Bank AG, HSBC Holdings Plc, Societe Generale SA , Standard Chartered Plc and UBS AG as joint lead managers and bookrunners for Tuesday’s euro deal.
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