RTR: China set to sell its first negative-yielding government bond

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REUTERS reports:

China was set to sell its first negative-yielding government bond on Wednesday, becoming the latest to benefit from this year’s plunge in interest rates in the COVID-19 pandemic.

Beijing was poised to sell a 750 million euro ($887.93 million) 5-year bond that, at 30 basis points (bps) above the so-called mid-swap rate of -0.45%, effectively offered investors a -0.15% interest rate.

The three-part deal also consisted of a 2 billion euro 10-year bond priced at 55 bps over the mid-swap rate and a 1.25 billion euro 15-year issue priced at 70 bps over the mid-swap rate, according to a document from a lead manager of the deal.

“Negative yields are part of an overall global trend now,” said Daniel Moreno, head of emerging markets debt at Mirabaud, adding there was now roughly $17 trillion worth of sub-zero debt globally. “I think we are going to see much more of this”.

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Update, 19 November: “China’s first negative-yielding sovereign bond spurs investor rush“.

Key quote: “This was a combination of the rarity of issuance alongside a positive outlook for China’s economy,” said Alan Roch, head of bond syndicate in Asia at Standard Chartered, one of the banks on the deal. He added that “From a relative standpoint, when you [as China] issue €4bn . . . you’re far from having filled people’s shoes in terms of demand.”