Lower yields a mark of confidence in city bonds
By Wang Yanlin |
November 16, 2011, Wednesday
|
Print Edition
Print Edition
Shanghai set the yield rates for its pilot scheme to sell government bonds at levels lower than expected yesterday, a mark of confidence in China's first regional government bonds to be directly backed by local authorities.
Today, the city will start to sell 3.6 billion yuan (US$569 million) of three-year notes at 3.1 percent, and 3.5 billion yuan of five-year notes at 3.3 percent.
If sales are good, it will bolster hopes for a warm response to upcoming offerings from three other local governments under the new trial scheme that allows local government to issue bonds directly.
"The attempt made by the Shanghai government is a breakthrough," said Yang Kai, a trader at Bank of Communications. "Quite a few institutions have shown interest in buying the bonds."
Yang said the bonds were expected to be popular given the city's strong fiscal health.
Bank of Communications is among the three major underwriters of the bonds. The other two are China Development Bank and Bank of Shanghai. Another 17 financial institutions, including Guotai Junan Securities Co, are minor underwriters.
The bonds are open only for institutional investors to subscribe at the current stage.
Both yield rates were 0.05 percentage points, or 5 basis points, lower than previous market estimates. According to traders, the yields also matched those of corresponding central government bonds.
"We had expected the Shanghai bond yields to be higher than central government bonds, but they are at the same levels," Dow Jones quoted a trader at a local bank as saying, adding it also reflected a general trend of easing monetary conditions.
Shanghai's municipal government is China's first local government to offer bonds directly instead of going through the Ministry of Finance. Shenzhen, Guangdong and Zhejiang are also to take part in the scheme.
Today, the city will start to sell 3.6 billion yuan (US$569 million) of three-year notes at 3.1 percent, and 3.5 billion yuan of five-year notes at 3.3 percent.
If sales are good, it will bolster hopes for a warm response to upcoming offerings from three other local governments under the new trial scheme that allows local government to issue bonds directly.
"The attempt made by the Shanghai government is a breakthrough," said Yang Kai, a trader at Bank of Communications. "Quite a few institutions have shown interest in buying the bonds."
Yang said the bonds were expected to be popular given the city's strong fiscal health.
Bank of Communications is among the three major underwriters of the bonds. The other two are China Development Bank and Bank of Shanghai. Another 17 financial institutions, including Guotai Junan Securities Co, are minor underwriters.
The bonds are open only for institutional investors to subscribe at the current stage.
Both yield rates were 0.05 percentage points, or 5 basis points, lower than previous market estimates. According to traders, the yields also matched those of corresponding central government bonds.
"We had expected the Shanghai bond yields to be higher than central government bonds, but they are at the same levels," Dow Jones quoted a trader at a local bank as saying, adding it also reflected a general trend of easing monetary conditions.
Shanghai's municipal government is China's first local government to offer bonds directly instead of going through the Ministry of Finance. Shenzhen, Guangdong and Zhejiang are also to take part in the scheme.
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