(Updates to give final guidance range, book size)
By Frances Yoon and Ina Zhou
HONG KONG, Oct 20 (IFR) - The People’s Bank of China has given final guidance for its 1-year Dim Sum benchmark of 3.15%, plus or minus 5bp, from initial price guidance of 3.30%.
The renminbi bonds will be issued in London, and will be the PBoC’s first overseas sale of paper.
The notes had received an order book of over 25 billion renminbi ($3.94 billion) by early afternoon.
The offering is seen as part of a push by China to promote international use of the renminbi, in order to boost the currency’s chances of being added to the basket that underlies International Monetary Fund’s special drawing rights when a review is held next month.
Jim Veneau, head of fixed income, Asia, at Axa Investment Managers, wrote yesterday that the notes would probably yield 3% or higher. “Valuation-wise, this is considered attractive since 10-year onshore Chinese government bonds yield only 3%,” wrote Veneau. He added that the total offering size was expected to be up to 5 billion renminbi.
The net proceeds from the unrated, fixed-rate, senior unsecured notes will be used to support the Chinese central bank’s functions.
The purpose of issuing the bonds is to increase the supply of high-quality bonds in offshore renminbi markets, support international investor needs in trading and liquidity, increase high-grade collateral offshore, and provide a better benchmark interest rate for renminbi offshore markets, according to a prospectus.
ICBC and HSBC are joint global coordinators and bookrunners. Other bookrunners include Agricultural Bank of China (Dubai International Financial Centre branch), Bank of China, Bank of Communications, China Construction Bank and Standard Chartered. (Reporting by Frances Yoon and Ina Zhou; editing by Vincent Baby and Daniel Stanton)