China Sells $4 Billion Dollar Bond as Evergrande Woes Fester
(Bloomberg) -- China sold a U.S. dollar bond in Hong Kong for the fifth straight year, even as strains emerge in the credit market amid deepening concerns over the financial health of the country’s property developers.
The Ministry of Finance said Sept. 30 it would sell a combined $4 billion of dollar bonds through a four-tranche deal, less than last year’s $6 billion sale. A person familiar with the matter said Tuesday that initial and final price guidance for the sale, which ended up at $4 billion, were as follows:
|3-year||T+35bp area||T+6bp (#)|
|5-year||T+45bp area||T+12bp (#)|
|10-year||T+55bp area||T+23bp (#)|
|30-year||T+85bp area||T+53bp (#)|
Yields on dollar junk bonds recently soared to their highest in a decade at 20%, according to a Bloomberg index, as investors price in increasing default risk for some Chinese borrowers. Still, demand has historically been strong for China’s sovereign debt offerings, which carry investment-grade ratings. And a flood of cash from central banks since the pandemic has cut financing costs for many borrowers around the world.
China made a comeback to the dollar bond market in 2017 after a 13-year hiatus. It’s since been an annual visitor and met with strong demand. It sold a combined $17 billion of the debt through 2020, as well as 8 billion euros ($9.3 billion) of bonds in that currency since 2019.
This year’s sale continues its reach to institutional U.S. investors. The Ministry of Finance broadened the breadth of potential buyers last year with China’s debut issuance of so-called 144A notes.
There was no reply from the ministry to a fax from Bloomberg News seeking comments on the bond offering.
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