(Adds details, comments)
* China finance ministry sells 16 bln yuan dim sum bonds
* 7 bln yuan of 3-year bonds at 2.53 pct was largest tranche
* Ample liquidity, low funding costs boost demand
By Michelle Chen
HONG KONG, May 21 China completed the sale of 16
billion yuan ($2.56 billion) in dim sum bonds on Wednesday,
drawing strong demand from institutional investors seeking to
diversify investment portfolios despite the weakness of the
China's economy has shown broad weakness in April and the
yuan has wiped out all its gains against the dollar last year,
but investor appetite for highly-rated debt remains intact.
Bonds of various tenors were offered, but the largest amount
sold was 7 billion yuan of three-year bonds at 2.53 percent, the
Ministry of Finance said on its website, in line with
expectations and lower than a previous auction last year.
The rest of the sale included 4 billion yuan of five-year
bonds at 3.25 percent, 1 billion yuan of both seven-year and
10-year bonds at 3.8 percent and 4 percent, respectively, and
500 million yuan of 15-year and 20-year bonds at 4.29 percent
and 4.5 percent.
Another 2 billion yuan was allocated to seven central banks
and regional monetary authorities, comprising 1.4 billion yuan
of three-year tenor, 400 million five-year tenor and 200 million
yuan seven-year tenor bonds.
The coupon rates for central banks were the same as the
"These are largely within the ranges of expectations," said
Frances Cheung, a senior strategist at Credit Agricole. "We see
continued demand for these papers due to needs for investment
diversification, including reserves diversification."
The 14 billion yuan institutional tranche was auctioned via
the Hong Kong Monetary Authority's Central Moneymarkets Unit
(CMU), which showed the total order book of the bonds reached
40.9 billion yuan.
Demand for the three-year tenor was especially strong where
the application amount was more than three times of the issue
The success of the sale was also due to ample liquidity in
the offshore market and low funding costs for foreign investors
to obtain the Chinese currency via cross currency swaps.
Hong Kong's yuan deposits rose to 945 billion yuan by the
end of March, up 4 percent from a year earlier. Together with
the yuan deposits in Taiwan, Singapore, London and South Korea,
the overall offshore pool amounted to 1.5 trillion yuan.
The Ministry of Finance (MOF) is the biggest and most
prolific player in the primary market of dim sum bonds and its
bond sales are a much awaited event among investors as it sets
the tone for other issuers.
The MOF will issue a total of 28 billion yuan in offshore
yuan bonds this year, the highest level since it first tapped
the dim sum market. This year's sales will make its issuance
since 2009 top 108 billion yuan.
Bank of Communications Hong Kong branch
is the issuing, lodging and fiscal agent of the bond issue.
($1 = 6.2384 yuan)
(Editing by Jacqueline Wong)