China's finance ministry conducted its largest yuan bond sale in Hong Kong since 2023, issuing a combined 15.5 billion yuan ($2.3 billion) in two-, three-, five-, and 15-year notes. The sale achieved record-low yields for both the two-year debt at 1.32% and the 15-year security at 2.08%. This move is part of Beijing's broader strategy to internationalize the yuan and absorb excess offshore liquidity.
This recent issuance follows other significant bond sales by China. On Wednesday, China issued 150 billion yuan in sovereign debt, with multiple tenors reaching all-time lows. For instance, the two-year bonds sold at 1.27%, 15-year bonds at 1.99%, and 30-year bonds set new lows. The overall subscription ratio across five bonds hit 4.67x, the highest since June 2025, indicating strong investor appetite.
Market observers attribute the robust demand to a scarcity of high-quality yuan-denominated assets and expectations of currency appreciation. Gary Ng, a senior economist at Natixis, noted that given the limited offshore yuan assets, the bond issuance was likely to attract strong investor interest. The bond sale is the fourth tranche of Beijing’s 84 billion yuan sovereign bond program for the year. This strong demand is also viewed as a validation of China's push to deepen its offshore yuan market and reduce the premium on offshore yuan bonds, making their yields more aligned with onshore levels.
