Company News

UPDATE 3-China lines up banks for record euro-denominated government bond sale

(Adds detail on sale timing, background)

LONDON, Nov 16 (Reuters) - China has hired a fleet of banks for what is likely to be its biggest ever euro-denominated international bond sale, according to a note to investors seen by Reuters.

The sale is due to happen on Tuesday and follows a similar transaction a year ago when Beijing sold its first euro-denominated government debt in 15 years.

Sources close to the deal said there were likely to be three to five tranches of bonds adding up to a “minimum” of between 5 and 8 billion euros ($5.9-$9.4 billion), which would top last year’s 4 billion euro deal.

The new sale comes amid a sudden rush of demand for emerging market debt after Joe Biden’s U.S. presidential election win and last week’s breakthrough with a coronavirus vaccine.

Bankers said the “real” yield premium China’s bonds offer once inflation is factored in compared to U.S. and European government bonds, which are now at long-term highs following emergency measures from the Federal Reserve and European Central Bank.

The bonds’ appeal has also been boosted by their inclusion into one of the world’s prominent debt indexes, driving investors that track the benchmark to buy the bonds.

The note added that “subject to market conditions”, Bank of China, Bank of Communications, China International Capital Corporation, BofA Securities, Crédit Agricole, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Societe Generale and Standard Chartered Bank would all work on the deal.

“There has been quite a few deals recently from EM countries,” the source close to the deal added. “I think the search for yield is probably one of the strong factors here. China has recovered well from the COVID crisis, so it could be even better for them.”

The yuan’s recent strength is another draw, having surged over 9% against the dollar since May and nearly 7% against the euro since late July.

Major investment banks predict it could hit the highs of early 2018 before U.S. President Donald Trump escalated his tit-for-tat trade war.

($1 = 0.8445 euros)

Reporting by Abhinav Ramnarayan and Marc Jones; Editing by Tom Arnold, William Maclean and Sam Holmes