Latest News:  
Beijing   Overcast/Cloudy    28 / 22 ℃  City Forecast

Home>>China Business

Yuan treasury bonds set for sale in HK

By Qiu Chen (Global Times)

08:08, June 25, 2012

Yuan-denominated treasury bonds issued in Hong Kong will soon be traded at the region's stock exchange, according to a memorandum of understanding (MOU) signed by the Ministry of Finance and Hong Kong Exchanges and Clearing Ltd Friday.

The government bonds mentioned in the MOU will be issued in Hong Kong starting this Thursday and will be worth a total of 23 billion yuan ($3.61 billion), the largest issuance of its kind since 2009. The ministry also points out that 2 billion yuan in government debt has been earmarked for sale to foreign central banks, marking the first time that the Chinese mainland government has allowed these overseas institutions to invest in its treasury bonds.

These measures aim to lead the yuan to greater prominence among the world's major currencies by promoting the offshore treasury bond market in Hong Kong, boosting the yuan's liquidity between onshore and offshore markets, and making it easier for the renminbi to be held abroad as a foreign-exchange reserve, Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, told the Global Times.

Given China's foreign trade structure, it is far easier for the yuan to exit rather than enter the domestic market, said Zhou, who added that of the combined yuan amount used in trade financing, 80 percent was paid by the mainland to other countries for imports, while only 20 percent of these funds came from abroad.

Issuing yuan-backed government bonds in Hong Kong will facilitate yuan flows back into the onshore market and thus contribute to cross-border liquidity of the currency, Zhou noted.

Allowing foreign central banks to purchase yuan-denominated government bonds will also help raise the share of yuan-denominated assets in foreign currency reserves overseas, a crucial step in the currency's internationalization, Zhou said.

At present, several foreign central banks, mostly from Asian countries, have expressed an interest in subscribing to yuan-backed government bonds, according to the Hong Kong Monetary Authority.

These central banks intend to purchase yuan-denominated treasury bonds as they are among the few investment products denominated in the Chinese mainland currency available in the offshore market, said Zhou Hao, a global market analyst from ANZ China.

This year, the interest rates on government yuan bonds issued in Hong Kong are expected to rise, as cross-border arbitrage has lifted the yields on offshore yuan-backed treasury bonds by narrowing the gap between their returns in onshore and offshore markets, Zhou Hao said.

According to Zhou, the spread started to narrow last year and the trend will continue until yields in the two markets reach near-parity. Currently, the yield rate on 10-year government bonds offshore is 3.15 percent, 0.3 percent lower than in the onshore market, Zhou said.

A total of 15.5 billion yuan in government bonds, with maturities ranging from three to 15 years, will hit the auction block for institutional investors this Thursday, while retail investors can subscribe to 5.5 billion yuan in bonds with a two-year maturity. Last year, the coupon rates for five-year and 10-year government bonds issued in Hong Kong were 1.4 percent and 2.36 percent respectively.

Email|Print|Comments(Editor:厉振羽、张洪宇)

Leave your comment0 comments

  1. Name

  

Selections for you


  1. Manual docking between Shenzhou-9 and Tiangong-1 completed

  2. Breathtaking sceneries on camera: incredibly beautiful

  3. Activities held across China to celebrate Dragon Boat Festival

  4. Traditional Han costume seen at ceremony to honor Qu Yuan

Most Popular

Opinions

  1. Chinese banks must go global
  2. Trade is tool to fix global economy
  3. Skyscraper frenzy brings loan risks to new heights
  4. China to 'maintain 8% growth for over 20 years'
  5. Larger labor force not a panacea for pension woes
  6. "China Containment theory" has no market
  7. Benefits of direct yen-yuan may be few, far between
  8. Keeping up appearances online proves tough job
  9. Why China's export growth rebounds robustly
  10. Don’t hate the trader, hate the securities game

What's happening in China

Bathe in "dragon water" at Sanya beach, China's Hainan

  1. 5 killed, 36 injured in N China crash
  2. Rain to hit more areas in China
  3. 400 mln yuan to be invested for Tibet's tourism
  4. China's cement output growth rate drops sharply
  5. Shanghai tightens restrictions on home purchase

China Features

  1. Left-behind kids have 'dream house'
  2. China's Olympic history: The road to success
  3. Eight systems of Shenzhou-9 manned spacecraft
  4. The thousand-year-old Tibetan paper
  5. Beijing Summit features five new aspects

PD Online Data

  1. Spring Festival
  2. Chinese ethnic odyssey
  3. Yangge in Shaanxi
  4. Gaoqiao in Northern China
  5. The drum dance in Ansai