China Development Bank to sell $2 billion onshore bond amid greenback glut
Reuters
Published Jun 02, 2021 06:27AM ET
SHANGHAI (Reuters) - Leading policy bank China Development Bank (CDB) said on Wednesday that it would sell its first dollar-denominated onshore bond in nearly six years as Chinese banks struggle with a mountain of dollars on deposit.
CDB is seeking to raise no more than $2 billion through the one-year bond issue on June 3, it said in a statement posted on the website of China Central Depository & Clearing Co.
CDB's first onshore dollar bond since September 2015 will be issued with a 0.38% coupon, the statement said.
Bo Zhuang, chief China Economist at TS Lombard, said the issuance would help to set a benchmark price for onshore dollar bonds and help to stabilise Chinese dollar bond pricing after worries over the repayment ability of bad debt giant China Huarong Asset Management Co Ltd rocked some Chinese dollar bond issuers in April.
CDB's issuance also comes as China's banks struggle with a glut of dollars that traders say poses a risk to authorities' efforts to control the rapidly rising yuan.
"(The issuance) is to prevent carry trade and speculation on the appreciation of the yuan," said a Hong Kong-based portfolio manager. "Once onshore USD is hard to borrow, people cannot short USD or borrow USD to do carry trading."
In a prospectus posted along with the statement, CDB said proceeds from the issuance would be used for dollar denominated loans and external payments.
While $2 billion is a drop in the bucket compared with $1 trillion in onshore dollar deposits, traders and analysts say it could have a psychological effect on market expectations for the yuan, which has rallied to three-year highs.[CNY/]
"If all the media coverage starts to say China is trying mop up the dollar liquidity onshore, then that would definitely help with easing the pressure of RMB appreciation," said Zhuang. "It's more about signalling."
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.