China Issues Euro-denominated Sovereign Bond with First Negative Yield


China’s Ministry of Finance (MOF) has announced the successful issuance of 4 billion euro in euro-denominated sovereign bonds, including the first sovereign bond issued by China with a negative rate.

MOF issued three tranches of euro-denominated sovereign bonds on 18 November, including 750 million euro in 5-year bonds, 2 billion euro in 10-year bonds and 1.25 billion euro in 15-year bonds.

The rate for the 5-year bond was -0.152%, while the rate for the 10-year bond was 0.318% and the rate for the 15-year bond was 0.664%.

Wang Qing (王青), chief macro-analyst for Golden Credit Rating, said that the the 5-year bond was the first Chinese sovereign bond issued with a negative rate, but this did not mean that Chinese sovereign bonds were entering a “negative rate era” across the board, given that the currencies play a decisive role in returns.

Wang points out that on 11 November MOF issued 5-year sovereign bonds with a rate of of 3.02%, while it issued USD$2.25 billion in dollar-denominated 5-year bonds via Hong Kong on 14 October with a rate of 0.604%.

On 18 November Germany issued 5-year sovereign bonds with a rate of -0.76%, which Wang points to as the market background for China’s issuance of a euro-denominated sovereign with its first negative rate.