China is preparing to sell $2 billion in bonds

Almaty. September 14. Silkroadnews – China is preparing to sell $2 billion in bonds, the U.S. Fox business reported.
“China is laying the groundwork for its first sale of U.S.-dollar sovereign bonds in more than a decade, a move toward expanding its ties with global investors as its economy improves,” the report said.
The sale, as noted, is planned for September.
According to the agency, despite the fact that the planned sale is not large and mostly symbolic, it will be the biggest sale of dollar bonds in China’s history and the first such move since October 2004, when the country received about $ 1.7 billion from the sale of dollar and euro-denominated bonds to mature in five and ten years.
Experts of research firm CreditSights say, China has about $200 million in outstanding U.S.-dollar sovereign debt, which is scheduled to be repaid in 2027 and 2096, and these bonds yield about 3.3% and 4%, respectively. In the 1990s, the country issued several global bonds, including a 100-year bond of $100 million with a 9% coupon in 1996.
However, since 2004 the government of China has been largely absent from the market due to the continuous influx of “hot money” - sudden rapid investment flows and rapid expansion of foreign reserves.
“The bond sale is coming as the cost of insuring Chinese government debt against default in recent months has fallen to its lowest level in two years, according to data from IHS Markit. It costs $58,000 annually to protect $10 million of Chinese debt from default over five years, versus $100,000 in September 2015,” the report reads.
Some investors use these so-called credit default swaps to hedge their holdings of Chinese debt investments. The fall in costs of protection indicates lower investor anxiety about the possibility of developing a financial crisis in China.
According to report, CreditSights said in a note last week that the new Chinese sovereign bonds could be priced to yield 0.5 percentage point over comparable Treasury securities. The five-year Treasury note recently yielded 1.747% while the 10-year Treasury was yielding 2.171%.