HONG KONG – China is planning to issue the largest yuan sovereign bonds in Hong Kong since 2023 this month, increasing supply to global investors just as yuan assets stand out as a haven amid the Iran war.
The finance ministry will issue 15.5 billion yuan (S$2.9 billion) government bonds in Hong Kong on April 22, according to its statement on April 15. The preliminary plan did not specify details such as the tenors to be offered.
The offering would exceed the February sale of 14 billion yuan and is set to be the largest single batch of so-called Dim Sum bonds issued in Hong Kong by the ministry since October 2023, according to Bloomberg-compiled data.
Chinese assets have staged haven appeal to global investors during the Iran war, with stocks proving resilient and bonds still delivering positive returns. The yuan also recently extended gains to a three-year high as investors assess the prospect of its growing role in the global monetary system amid rising geopolitical frictions.
The increase is in line with People’s Bank of China Deputy Governor Zou Lan’s comments in January that China will raise the annual issuance size of offshore yuan-denominated government bonds, as he vowed to enhance market liquidity and support Hong Kong’s development as a major yuan business hub.
“China’s resilience to higher energy prices, with renewables and nuclear already overtaking oil as the second‑largest energy source, makes its currency and rates more attractive to global investors,” said Mr Samuel Tse, senior economist at DBS Bank. “Combined with Hong Kong’s deep yuan liquidity, this macro backdrop sets the stage for bigger issuance and reinforces the role of yuan bonds as a structural diversifier.”
Demand has been robust in China’s recent offshore yuan bond sales, supported by both foreign investors and mainland buyers via the Southbound Bond Connect channel. Yields were priced at the lowest levels since at least 2013 for two-, three-, and five-year notes in the February issuance, amid continued oversubscription, according to data compiled by Bloomberg.
Yuan liquidity in Hong Kong also remains ample, opening a favourable funding window for borrowers. The one-month offshore yuan HIBOR, a key indicator of interbank funding costs, stood at 1.52 per cent on April 14, just shy of a one-year low. BLOOMBERG
