The Daily Check-In: Accessing China’s Bond Market Description video: James Houghton, co-head of the Asia Pacific FICC Franchise for Goldman Sachs’ Global Markets Division, discusses the significance of the FTSE Russell’s inclusion of Chinese bonds in its World Government Bond […]
The Daily Check-In: Accessing China’s Bond Market
James Houghton, co-head of the Asia Pacific FICC Franchise for Goldman Sachs’ Global Markets Division, discusses the significance of the FTSE Russell’s inclusion of Chinese bonds in its World Government Bond Index and what this could mean for capital inflows into China. \n\nThis video was recorded on September 24, 2020 \n \nThis video should not be copied, distributed, published or reproduced, in whole or in part. The information contained in this recording was obtained from publicly available sources, has not been independently verified by Goldman Sachs, may not be current, and Goldman Sachs has no obligation to provide any updates or changes. All price references and market forecasts are as of the date of recording. This video is not a product of Goldman Sachs Global Investment Research and the information contained in this video is not financial research. The views and opinions expressed in this video are not necessarily those of Goldman Sachs and may differ from the views and opinions of other departments or divisions of Goldman Sachs and its affiliates. Goldman Sachs is not providing any financial, economic, legal, accounting, or tax advice or recommendations in this podcast. The information contained in this video does not constitute investment advice or an offer to buy or sell securities from any Goldman Sachs entity to the listener and should not be relied upon to evaluate any potential transaction. In addition, the receipt of this video by any listener is not to be taken to constitute such person a client of any Goldman Sachs entity. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this video and any liability therefore (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed.
China Raises $ 6 Billion Through Bonds
China raised $ 6 billion on Tuesday in the largest international sovereign bond offering in history as it faced a sharp drop in borrowing costs this year.
The Ministry of Finance has placed the bonds in four tranches. The three-year issue sold at 35 basis points above the benchmark for US Treasuries, a source at an investment bank told Reuters. According to him, the 5-year bonds were sold by 40 bp. higher Treasuries, 10-year-olds – by 50 bp. higher than Treasuries, and the 20-year tranche – by 70 bp. above Treasuries.
The deal came after a market rally this year that caused a sharp decline in global bond yields, which significantly lowered funding costs.
The total of $ 6 billion was roughly double the initial demand for bonds, according to IFR Refinitiv’s Capital Markets Information Service..
China’s finance ministry has indicated that the move will help improve the bond’s yield curve. it «will provide a price benchmark for Chinese enterprises issuing USD bonds», said in a message from the Bank of China posted on its website on Tuesday.
Earlier this month, China also floated its first Eurobonds in 15 years, raising $ 4.4 billion, and analysts believe European markets will be a more significant source of funds for the Asian giant going forward..
All bonds offered buyers a yield of 2 to 3%. 10-year US Treasury bonds floated on Tuesday posted 1.75%, according to Refinitiv data, nearly 150 basis points below their highs in October last year.
«From a tactical funding point of view, now is the best time to get relatively inexpensive funding.», – said Alex Kozhemyakin, Head of Emerging Markets Debt at Macquarie Asset Management in New York.