Bonds Feb 05

Bank of China issues $500 million in bonds as Yulan makes its debut

Debt product named after Shanghai's city flower is the latest blossoming of Chinese financial markets as they open up further to global investors

Bank of China issues $500 million bonds as Yulan makes its debut
China's Yulan bonds are expected to be denominated mostly in US dollars or euros. File photo-illustration by Reuters.

(ATF) Bank of China has debuted China’s Yulan bonds, a new debt product that links Chinese companies with global investors, the securities depositary that provides settlement services announced on February 4.

The bank, China’s fifth-largest lender by market capitalisation, has raised US$500 million from selling the bonds. Brussels-based Euroclear, said the bonds, which have a maturity of three years and an annual interest rate of 0.86%, were oversubscribed four times.

“It marks yet another step in the opening up of Chinese financial markets to global investors, and should further facilitate Chinese firms in tapping global debt markets,” Chang Wei Liang, macro strategist at DBS Bank in Singapore, said. 

Yulan bonds are issued through Shanghai Clearing House, which serves the Chinese interbank bond market. But international investors settle the securities with Euroclear's network.

The bonds, which are named after Shanghai's city flower, the magnolia, were announced in December. The Regulation S bond, issued by Bank of China (Hong Kong) bears a 0.75% coupon and was issued at a spread of 67 basis points over US Treasuries.

“We expect that this bond structure will yield further success and anticipate that this new generation of bonds will bring increased efficiencies and convenience to issuers and investors globally,” Zhou Quan, head of asset and liability management at Bank of China, said.

The rating agency Moody’s assigned an A1 rating to the issuance, while Fitch rated the bond A. 

“Yulan bonds are expected to be mostly in US dollars or euro denominated, and are targeted at international investors,” Chang said.


Euroclear links Chinese firms with global capital via 'Yulan bonds'

New bond underwriting rules set to boost foreign inflows

bond debt Euroclear Shanghai China Bank of China