(Economic Observer) What role will the first offshore RMB treasury bond arrive in Hong Kong this year?
China News Agency, Beijing, September 23 (Reporter Zhao Jianhua) On the 23rd, the Chinese Ministry of Finance issued the first offshore renminbi treasury bonds this year in Hong Kong, the world’s largest offshore renminbi settlement center, with a scale of 8 billion yuan.
Including this treasury bond, the Ministry of Finance plans to issue 20 billion yuan of treasury bonds in Hong Kong this year.
The tender issuance of 8 billion yuan of government bonds, with the 2-year and 5-year issuances of 5 billion and 2 billion respectively, and an additional 1 billion yuan of bonds due in 2031.
This is also the first 10-year renminbi treasury bond issuance after a lapse of three years.
The scarcity and liquidity of long-term renminbi treasury bonds in the offshore market can thus be made up for.
With the internationalization of the renminbi and the low interest rates of US Treasury bonds, the market has a strong demand for renminbi assets.
According to Wang Yunfeng, President and Chief Executive Officer of HSBC Bank (China) Co., Ltd., on the one hand, the issuance of overseas RMB bonds by high-rated Chinese-funded institutions this year has generally been recognized by the market, showing many bright spots in terms of pricing levels and investor distribution.
On the other hand, overseas institutional investors continue to follow the Ministry of Finance's offshore RMB treasury bond issuance arrangements and plans.
Since 2009, the scale of renminbi treasury bonds issued in Hong Kong has steadily increased from 6 billion yuan, reaching a peak of 28 billion yuan, and has remained at 15 billion yuan in recent years.
This year plans to issue 20 billion yuan, an increase of 5 billion yuan over previous years.
According to the relevant person in charge of the Ministry of Finance, this not only satisfies market demand well, but also shows that the central government has increased its support for Hong Kong.
The continuous issuance of renminbi government bonds in Hong Kong has not only supported the development of the offshore renminbi market, but also consolidated Hong Kong’s position as an international financial center and the world’s largest offshore renminbi settlement center.
Although Hong Kong is a global financial center, the bond market is relatively backward.
E Zhihuan, chief economist of Bank of China Hong Kong, introduced that Hong Kong’s outstanding advantages for a long time lie in the stock market and banking sector. The regular issuance of treasury bonds will help expand the scale of the bond market and at the same time drive other institutions to increase bond issuance and financing in Hong Kong.
As a series of high-credit RMB investment products, RMB government bonds can meet the needs of international investors to directly allocate high-quality RMB assets in the offshore market.
While supporting Hong Kong, Wang Yunfeng said that this is also a favorable move for China to continue to promote the opening up of the capital market and the internationalization of the renminbi.
Since 2009, the term structure of RMB treasury bonds has been continuously optimized. From the common maturity varieties of 2 years, 3 years, and 5 years, the key maturity varieties have been gradually increased, and a complete yield curve of RMB government bonds has been initially formed.
According to E Zhihuan's analysis, the issuance of RMB treasury bonds in Hong Kong has enabled the RMB yield to gradually form a more independent and explicit price, and it has truly developed into an anchor currency.
As one of the many beneficiaries of improving the yield curve of offshore RMB treasury bonds, overseas financing of Chinese-funded institutions can more easily find an "anchor" and reasonably control financing costs.
Standard Chartered Bank Greater China and North Asia Debt Capital Market Supervisor and Managing Director Yan Shoujing said that the issuance of offshore RMB government bonds with different maturities by the Ministry of Finance can set a good benchmark interest rate for Chinese institutions or companies to issue offshore RMB bonds. .
As of the end of August this year, the Ministry of Finance has issued 218 billion yuan of renminbi government bonds in Hong Kong, 3 billion yuan of renminbi government bonds in London, and 2 billion yuan of renminbi government bonds in Macau, with a balance of 50.1 billion yuan.
Beginning on October 29, the FTSE World Government Bond Index (WGBI) will be officially included in China’s government bonds.
This will stimulate international investors' interest in renminbi treasury bonds and increase the liquidity of the secondary market.
The relevant person in charge of the Ministry of Finance stated that the next step will be to continue to improve the yield curve of offshore renminbi government bonds in light of the dynamics and needs of the development of the offshore renminbi market.
Since 2009, the offshore RMB government bond issuance mechanism has continued to innovate, and the trading activity in the secondary market has continued to increase.
All previous national debt issuances have been welcomed by international investors. Central banks, monetary management authorities, commercial banks, funds, asset management companies, and international financial organizations in Asia, Europe, Africa, and the Americas have actively participated.
Driven by the continuous issuance of renminbi treasury bonds, the renminbi market in Hong Kong has achieved rapid development. The scale of deposits has increased from 60 billion yuan to about 1 trillion yuan; the annual bond issuance scale has never been less than 10 billion yuan, and the highest is more than 200 billion yuan.
On the day following the issuance of the current national debt, the Mainland and Hong Kong bond markets interconnected Southbound Cooperation ("Southbound Link") went online.
Yan Shoujing said that investors can purchase offshore RMB bonds more conveniently in the future.
Other investors believe that the opening of the "Southbound Link" will drive both supply and demand in the Hong Kong bond market.
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