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China has issued dollar bonds at rates equivalent to US Treasury yields, in what bankers on the deal said was the first time Beijing’s borrowing costs have matched Washington’s.
The bond offering is the latest example of countries taking advantage of being able to issue international debt cheaply, as their borrowing costs in relation to US Treasuries fall to some of the lowest levels on record.
China’s issuance follows a de-escalation in trade tensions between Beijing and Washington after US President Donald Trump and Chinese President Xi Jinping agreed to a one-year trade truce last week.
China’s Ministry of Finance issued $4bn of dollar bonds in Hong Kong, pricing the three-year bond on par with US Treasury equivalents, with a coupon of 3.625 per cent. The five-year bond was priced 0.02 percentage points above equivalent US Treasuries.
“Markets are flush with liquidity and geopolitical tensions have eased,” said David Yim, head of capital markets, Greater China and North Asia, at Standard Chartered, which was one of the bookrunners for the deal.
Another person noted that investors were interested in Chinese sovereign dollar debt to diversify their portfolios and that the relatively limited issuance had led to the oversubscription.
Order books showed that the five-year bond was 30 times subscribed, with more than half of the offers coming from central banks, sovereign wealth funds and insurance companies.
In September, Abu Dhabi sold $2bn in 10-year bonds at a spread to US Treasuries of 0.18 percentage points. South Korea’s finance ministry issued $1bn of dollar bonds with a maturity of five years at a spread of 0.17 percentage points in October.
China last issued dollar bonds in 2024, when it sold $2bn of debt in Saudi Arabia.
A syndicate of Chinese, US and other foreign banks managed Thursday’s deal. The proceeds will be used for “general government purposes”, according to the bond term sheet. The deal will be settled next Thursday.
While Chinese dollar-denominated debt has previously traded at a negative spread to US equivalents, bonds have always been priced at a premium, although the spread has narrowed.