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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 had 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 finance ministry issued $4bn of dollar bonds in Hong Kong, with the 3-year bond paying a coupon of 3.625 per cent, on par with US Treasury equivalents, and priced to yield 3.646 per cent, compared with 3.628 per cent for 3-year Treasuries.
The 5-year bond has a coupon 0.02 percentage points above equivalent Treasuries, with a yield of 3.787 per cent, compared with 3.745 per cent for US equivalents. Issuance was split evenly between the two bonds.
“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.
The issuance shows “China is able to access the US dollar system at will”, said Mitul Kotecha, head of foreign exchange and emerging markets macro strategy at Barclays.
Another person familiar with the deal 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 5-year bond was more than 30 times subscribed, with more than half of the orders 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.
“I would imagine other central banks and sovereign wealth funds are watching this with very focused eyes and thinking this could be the way to go,” Kotecha said.
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 bonds have previously traded at a negative spread to US equivalents in the secondary market, they have previously always paid a premium at issuance.
