Chinese gov’t bonds vastly oversubscribed on day one

Institutional investors snapped up the Chinese government bonds sold in Macau for the first time last week.

The Chinese central government issued government bonds worth two billion yuan (USD291 million) in Macau on July 4. The bonds were reportedly oversubscribed for 5.4 billion yuan by the afternoon of the same day.

According to analysts, the oversubscription suggests that demand for the bonds will continue to remain high.

Meanwhile, on July 5, the Ministry of Finance of China announced the issuance of RMB sovereign bonds with an aggregate principal amount of RMB300 million (retail portion), due 2021, offered to Macau citizens.

The bonds bear interest at 3.3% per annum for the retail portion, and the admission amount is set at 10,000 yuan.

According to the sole global coordinator and joint lead manager and joint bookrunner of the bond, Bank of China, Macau Branch, the main institutional investors include the Monetary Authority of Macao, sovereign pension funds, well-known charitable organizations, social groups, commercial banks and insurance companies, and institutional investors from Macau, Hong Kong and Portuguese- speaking countries.

Regarding sales in the retail segment, the bonds will be available for subscription until July 19. The denomination of the bonds is RMB10,000, and any Macau resident aged 18 or above can apply for the bonds through any one of eight local placing banks.

As of today, no updates on the subscriptions of the retail segment have been provided by the placing banks.

The Ministry of Finance will pay interest on the bonds semi-annually in arrears on the interest payment dates on January 25 and July 25 of each year, beginning in January 2020. It shall not redeem the bonds prior to the maturity date, which is expected to be July 26, 2021.

The bonds are issued in renminbi, and all the interest, subscription prices, and redemption prices are to be paid in renminbi.

According to current coupon rates, the annual interest will be RMB330 for a denomination of RMB10,000 for one year and RMB660 for two years on the maturity date.

In June, the central government issued two-year yuan-denominated bonds worth RMB3,500 million, with the highest accepted coupon rate set at 2.95 percent, lower than the rate of the bonds issued in Macau. JZ