China Dollar Bond Orders Hit 7-Month Low Before U.S. Polls

(Bloomberg) -- Demand for Chinese dollar bonds dropped for a second month to the weakest level since the pandemic-induced selloff in March, as U.S. election jitters amid an issuance boom overwhelmed investor appetite.

Orders for Chinese offerings fell to 4.5 times their issuance size in October, the lowest ratio in seven months, according to Bloomberg-compiled data of available deal statistics. That compares with a record 7.8 times in August and 4.9 times in September. Bonds of all Asian issuers, excluding Japan, were about 4.2 times subscribed.

Investors were swamped by a flurry of deals last month as Chinese borrowers rushed to tap the debt market before the U.S. presidential election in November. Now, with that event hurdle out of the way, demand may rebound strongly soon, according to Australia & New Zealand Banking Group Ltd.’s Owen Gallimore.

“The dip in books for Chinese dollar bond offerings was a market-wide phenomenon and we now expect to bounce back strongly post election uncertainty,” said Gallimore, head of credit strategy at Australia & New Zealand Banking Group. “The deluge of small China property deals should grow to the more-in-demand China SOE and financials,” he said, referring to state-owned enterprises.

Chinese companies led Asia in selling a record amount of investment-grade dollar bonds in the third quarter. Among last month’s issuers, the country’s Ministry of Finance raised about $6 billion that drew bumper demand.

China will continue to attract the larger investor books in primary markets and the coronavirus vaccine progress should also help boost the overall sentiment, said Gallimore. The subscription ratio for Asian borrowers outside China and Japan was steady from the previous month at just 3.6 times in October, the data showed.

©2020 Bloomberg L.P.

With assistance from Bloomberg