China begins selling dollar bonds even as Evergrande Woes Fester
(Bloomberg) – China markets a sale of dollar bonds in Hong Kong for the fifth year in a row, even as tensions emerge in the credit market amid growing concerns about the financial health of the country’s real estate developers.
The Ministry of Finance announced on September 30 that it would sell a total of $ 4 billion in dollar bonds through a 4-tranche deal, less than the sale of $ 6 billion for the year. last. A person familiar with the matter said on Tuesday that the initial price forecast is as follows, with premiums on Treasuries lower than initial indications from last year’s deal:
The supply of debt will be a test of investor sentiment at a time when risks specific to China have increased. A regulatory crackdown on the country’s real estate sector and a debt crisis at the future major developer of the China Evergrande group sent shockwaves through the country’s credit markets.
Yields on junk dollar bonds recently hit their highest in a decade at 20%, according to a Bloomberg index, as investors factor in increased default risk for some Chinese borrowers. Yet demand has always been strong for China’s sovereign debt offerings, which carry premium ratings. And a flood of central bank liquidity since the pandemic has reduced funding costs for many borrowers around the world.
China returned to the dollar bond market in 2017 after a 13-year hiatus. It has been an annual visitor and has met high demand. He has sold a total of $ 17 billion in debt until 2020, as well as 8 billion euros ($ 9.3 billion) of bonds in that currency since 2019.
This year’s sale continues to hit US institutional investors. The finance ministry broadened the spectrum of potential buyers last year with China’s first issue of so-called 144A notes.
There was no immediate response from the ministry to a Bloomberg News fax requesting comment on the bond offering.
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