China prepares sale of $2 billion in US-dollar bonds
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China prepares sale of $2 billion in US-dollar bonds

7 news, 4

The government is preparing to sell $2 billion in bonds this month, and investment banks are pitching for a role in the deal, according to bankers in Hong Kong.

While the planned sale isn’t large and is mostly symbolic, it would be China’s biggest-ever U.S.-dollar bond sale and its first since October 2004, when the country raised a total of about $1.7 billion from selling dollar- and euro-denominated bonds that matured in five and 10 years.

China’s Ministry of Finance didn’t immediately respond to requests for comment.

China has about $200 million in outstanding U.S.-dollar sovereign-debt issues that it is scheduled to pay off in 2027 and 2096, and those bonds yield about 3.3% and 4% respectively, according to research firm CreditSights. The country issued several global bonds in the 1990s, including a 100-year $100 million bond in 1996 with a 9% coupon.

But the government has been largely absent from the market since 2004, as officials were coping with a continuous influx of “hot money”-sudden rushes of investment flows-and a rapid buildup 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. So...

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