Canadian Province Issues Offshore Yuan Denominated Bonds
British Columbia officials says plan was to sell 500 million yuan worth, but oversubscribing pushed the amount raised up five times
(Beijing) – Canada’s western province of British Columbia said on November 5 it had completed the issuance of one-year offshore yuan-denominated bonds and raised 2.5 billion yuan.
This is the first time a foreign government has issued offshore yuan bonds. Mike de Jong, finance minister of Canada’s westernmost province, said officials had intended to raise only 500 million yuan but the bonds were largely oversubscribed.
Central banks and foreign institutions snapped up 62 percent of the bonds. Fund asset managers bought 18 percent. Investors in Hong Kong took 46 percent of the bonds, and 40 percent went to U.S. investors.
The bonds carry a yield of 2.25 percent. This is 10 to 15 basis points lower than bonds sold by the Chinese government, said HSBC, the sole book runner of the issuance. The bonds will be listed in Luxembourg.
Jim Hopkins, assistant deputy minister of British Columbia’s finance ministry, said earlier that the province wanted to be an early entrant in the offshore yuan market, which is expected to grow rapidly and benefit participants in terms of lower trading cost with China and more diversified financing and investment channels.
An official with the ministry said the offshore yuan bond market was weighted down a bit in the second and third quarters of this year because of the anticipated impact of the U.S. Fed slowing its so-called quantitative easing policy. He expected the market to improve as investors change their opinions.
Meanwhile, China’s Ministry of Finance said on November 5 that it will sell dim sum bonds worth 10 billion yuan in Hong Kong on November 21. This will be the second issuance this year. This first was in June, when 13 billion yuan worth of the bonds were sold.
Hong Kong residents will be able to buy up to 3 billion yuan worth of those bonds through banks and, for the first time, through the former British colony’s bourse, the ministry said. Institutional investors will get the rest.