Bonds Jun 03

Global coronavirus bond issuance exceeds $122 billion

Issuance of coronavirus bonds has exceeded 870 billion yuan ($122.34 billion), but the actual use of these funds also has some regulatory issues

Global coronavirus bond issuance exceeds $122 billion
Fighting the coronavirus has required massive amounts of protective clothing and equipment. File photo by AFP. 

(ATF) Research by China's International Political and Economic Information Network has calculated the bonds issued globally to date designed to stop the spread of coronavirus, plus improve medical systems and help companies solve related problems.

The issuers range from international institutions to governments of various countries. International investors are also beginning to pay attention to ESG – environmental, social and corporate governance. The global issuance of coronavirus bonds has exceeded 870 billion yuan ($122.34 billion), but the actual use of these funds also has some regulatory issues.

Coronavirus bonds are issued under an international framework, including “social contribution bonds” that have strict requirements for information disclosure after the issuance, and ordinary bonds, which generate funds used to contain the pandemic. Due to the low interest rates caused by monetary easing, institutional investors are troubled by the use of some of the funds raised. In this context, the coronavirus debt equivalent to ESG – governance – has become a powerful investment target.

Coronavirus bonds have previously been issued by international institutions with a higher credit rating. At present, debt issued by states directly to raise funds for epidemic prevention is also increasing.

In April, Indonesia raised about $4 billion in funds by issuing US dollar treasury bonds. Affected by the economic slowdown caused by the epidemic, the country has relaxed its rules on fiscal discipline that limited the fiscal deficit to less than 3% of gross domestic product, and issued the first 50-year bond (to raise $1-billion), which is considered to be the country’s first bond.

Nine other countries such as Chile and Serbia have also issued ordinary national debt for the purpose of fighting the epidemic.

The Central American country Guatemala issued approximately $1.2 billion in national bonds as social contribution bonds in April, in accordance with the principles of the International Capital Market Association (ICMA).

Countries are raising funds for large-scale fiscal policies to boost their medical and economic fields. To date, China has started and continues to use bond issuance to fund the fight against the epidemic.