China sells $3 B dollar bond sale amid credit crisis

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China sells $3 B dollar bond sale amid credit crisis

- China is selling a dollar bond sale in Hong Kong for the fifth straight year, even as strains emerge on the credit market amid deepening concerns over the financial health of the country s property developers.

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The Ministry of Finance announced on 27 Sept it would sell a combined $3 billion of dollars bonds through a 4 tranche deal, less than last year s $6 billion sales. A person familiar with the matter said Tuesday that initial price guidance is as follows: premiums over bills are lower than the initial indications on last year s deal.

The debt offering will be a test of investor sentiment at a time when China-specific risks flared. A regulatory clampdown on the nation's real estate sector and a debt crisis at major developer China Evergrande Group have sent shock waves through the country s credit markets.

Yields on dollar junk bonds have recently surged to their highest level in a decade at 20% according to a Bloomberg index, as investors price in increasing default risk for some Chinese borrowers. It is still the demand for China s sovereign debt offerings that carry investment rating ratings, which has historically strong demand. After the pandemic, a flood of cash from central banks has cut financing costs for many borrowers around the world.

China made a comeback to US dollar bond market in 2017 after a 13 year hiatus. It's been an annual visitor since then and has been met with strong demand. It sold a combined $17 billion of debt through 2020, as well as 8 billion euros $9.3 billion of bonds in that currency since 2019, including a combined $17 billion of bonds and notes since 2019.

This year s sale continues its reach to institutional investors. The Ministry of Finance narrowed the pool of potential buyers with the debut of 144 A notes by China last year.

There was no immediate response from the ministry to a fax from Bloomberg News asking for comments on the bond offering.

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