China Dollar Bond Demand Surged in August Despite Evergrande
(Bloomberg) -- Appetite for Chinese dollar notes bounced back in August even as concerns about China Evergrande Group weighed on the nation’s broader junk-bond market and spurred average monthly yields on that debt to their highest in at least eight years.
Orders for Chinese offerings were 7.7 times their issuance size last month, the highest in year, though total sales remained rather muted given the seasonal summer slowdown. That compares with an oversubscription ratio of 4 in July, the lowest since 2019, according to Bloomberg-compiled data of available deal statistics.
There was robust demand for debt offerings from Chinese borrowers that were able to tap the offshore bond market in August despite prevailing uncertainty over the future of Evergrande. Contagion risks in China’s credit market looked relatively contained last month with some tentative signs of stress easing.
August is a slow time of the year generally for dollar bond offerings from Chinese borrowers. Investors are watching how much activity rebounds after sales from property firms, a frequent issuer in the market, dropped to their lowest since the holiday lull in February. Already, dollar bond sales from Chinese builders this month have nearly matched the $2.3 billion that was raised in August, according to Bloomberg-compiled data.
Appetite for the broader pool of dollar bonds sold in Asia excluding Japan also surged last month, with orders reaching 6.9 times deals’ offering size versus 3.8 times in July. The oversubscription ratio climbed to 5.3 times from 3.6 for Asian issuers outside of China.
Meanwhile, Chinese firms sold six debut dollar bond deals last month, half of July’s level. The total across Asia ex-Japan eased to 10 in August from 14.
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