IFC issues its first offshore discount note denominated in yuan

HONG KONG Tue Feb 26, 2013 5:04am EST

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HONG KONG Feb 26 (Reuters) - The International Finance Corporation, an arm of the World Bank, issued its first yuan-denominated discount note in the offshore yuan market (CNH) on Tuesday, in a move that will further support China's efforts to internationalize its currency.

The size of the offshore yuan bond is equivalent to about $50 million with a three-month maturity.

"The IFC discount note program introduces a new asset class for investors seeking high-quality credit, and short-term financing alternatives in the CNH market," said IFC's Treasurer Jingdong Hua in a statement.

A discount note is a short-term debt issued at a discount to par value. Discount notes have maturities of up to one year and are typically issued by government-sponsored agencies or highly rated corporate borrowers.

Standard Chartered Bank is the sole arranger for IFC's Global Discount Note Program including the yuan bond issue.

China has been actively promoting its currency to global investors, in a bid to reduce reliance on the U.S. dollar and lift the status of the "redback" to match its position as the world's No.2 economy.

The process has picked up this year, with Taiwan and Singapore each granted a yuan clearing bank. Bank of England is also in talks with China's central bank to establish a reciprocal three-year renminbi/sterling currency swap agreement.

The offshore yuan bond market has grown rapidly since the first dim sum bond was issued in July 2007. Total issuance volume amounted to 29 billion yuan ($4.65 billion) year to date, according to Thomson Reuters statistics.

The IFC tapped China's onshore bond market as early as in 2005, when it became the first issuer of Panda bonds, yuan-denominated bonds raised in mainland China by a non-Chinese entity. ($1 = 6.2339 Chinese yuan) (Reporting by Michelle Chen; Editing by Sanjeev Miglani)

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