China will sell its first US dollar-denominated sovereign bonds since 2004 in coming months along with yuan bonds, in its first overseas issuance of national debt since Moody’s downgraded its sovereign credit rating in May. The finance ministry said on Tuesday it will issue 14 billion yuan ($2.06 billion) of treasury bonds denominated in yuan, and $2 billion in dollar-denominated sovereign bonds. IFR said it would be China’s first dollar bond offering since October 2004.
The Ministry said the Treasury bonds will be issued in Hong Kong in two separate tranches of 7 billion yuan each. The first will be issued by June 30, and the other in the second half of this year. China has sold yuan-denominated bonds over the last few years as part of efforts to internationalise its currency.
The $2 billion in dollar-denominated sovereign bonds will be issued in the second half of this year. Moody’s Investors Service on May 24 downgraded its credit rating on China for the first time in nearly 30 years, saying the country’s financial strength is expected to erode as economic growth slows and debt continues to rise.
It cut the rating one notch, to A1 from Aa3. The bond sale will test if the rating agency’s action would increase borrowing costs for Chinese borrowers.