China plans dollar-bond sale

With the world’s second-largest economy rapidly cooling down, China is preparing to sell US dollar bonds to test investor appetite.

According to a notice sent to investors on Monday, the country’s finance ministry has appointed 14 banks, including both international and domestic firms, for the sale of bonds. It will be the fifth year in a row that China has raised billions of dollars in debt sales in international bond markets.

The ministry had earlier said it would issue bonds worth $4 billion, including loans maturing in 3, 5, 10 and 30 years.

On Monday, China said its economy grew 4.9% in the third quarter from a year earlier, up from 7.9% in the previous period. A number of issues are weighing in, including power shortages, supply-chain problems and regulatory pressure on the tech and property sectors, have helped push giant developer China Evergrande Group to the brink of default.

Last week, the cost of insuring the Chinese government’s dollar debt in case of default, as measured by credit default swaps, rose to its highest point since April 2020, when the early stages of the global Covid-19 pandemic hit global markets. I was roaming.

According to Refinitiv, the default swap on China rose to more than 0.57 percent, meaning it costs more than $57,000 per year to insure a $10 million loan from default. Still, that figure has plummeted – by about 0.51 percentage points as of Friday – and is well below the high it hit in recent years. As recently as early 2017, Chinese CDS traded above 1 percentage point.

China has a solid investment-grade credit rating, with an A1 rating from Moody’s Investors Service and a similar A+ grade from S&P Global Ratings and Fitch Ratings. Those grades correspond to Japan.

Moody’s said volatility in the asset sector is unlikely to present a systemic threat, but it could reduce revenues for regional and local governments, which need land for large parts of their income, putting pressure on some smaller regional banks. depend on sales.

Last week, China’s central bank said the risk of Evergrande’s problems spreading through the financial system was controllable and that individual financial institutions did not have major exposures to Evergrande.

Last fall, China issued $6 billion worth of bonds with maturities of five to 30 years. It sold the equivalent of about $4.7 billion in bonds in euros, including its first negative-yielding debt.

Like last year’s dollar bonds, this year’s both will be sold in the 144a format, which allows investors to sell debt to investors in the US, as well as under the less stringent Regulation-S framework for international debt sales, notices to investors. have been shown. .

This story has been published without modification to the text from a wire agency feed