“Since 2020, the issuance of Asian G3 bonds has reached US $209.4 billion, of which US $136.1 billion comes from Chinese issuers, accounting for 65% of the total. Despite the impact of the epidemic spreading overseas in March and April, the issuance of US dollar bonds by Chinese funded enterprises declined year on year, but since May, the amount of overseas bonds issued by Chinese funded enterprises has fully recovered to the level of the same period last year, and the issuance in July has exceeded that of the same period last year. ” Zhongrui, head of the bond capital market in China of Deutsche Bank, said in an interview with the Securities Times reporter.
according to the data of united credit statistics, from the perspective of a single month, due to the severe outbreak of the epidemic in the United States at the end of March, which triggered market panic, the Chinese dollar bond market rapidly cooled down in April, and the issuance scale significantly shrank to US $5.057 billion. However, with the positive rescue measures taken by the Federal Reserve and the gradual restart of the US economy, the issuance volume of Chinese funded US dollar bonds in May and June was gradually Gradually recovered to US $7259 billion and US $27.090 billion respectively.
the rapid recovery after the cold issue of Chinese funded US dollar bonds was mainly due to the lower issuance cost of Panasonic bonds with global liquidity. Fang Zhongrui said that the Chinese dollar bond market has recovered significantly since May, and the temporarily shelved issuance plan in March and April has been basically restarted. After the global spread of the epidemic, the Federal Reserve successively adopted radical interest rate cuts and economic stimulus measures to provide greater liquidity support to the market. The yield of US Treasury bonds has repeatedly reached new lows, and the issuance premium and absolute issuance cost of enterprises have also dropped to a low level. At present, the issue cost of Chinese dollar bonds has reached a new low in recent years, thus attracting more Chinese enterprises to issue. At the same time, thanks to lower issuance costs, Chinese issuers have preferred large-scale, long-term US dollar bonds this year.
“the Federal Reserve released a large amount of liquidity to the market on a record scale in the second quarter, which significantly reduced the yield of US Treasury bonds of various maturities and significantly reduced the issuance cost of Chinese funded US dollar bonds. In the second quarter, the issuing interest rate of Chinese funded US dollar bonds fell sharply, with an average coupon rate of 4.78%, setting a record of the lowest issuance cost since the third quarter of 2017. ” According to the United Credit Research Report.
the low interest rate environment is particularly beneficial to the issuance of high credit rating bonds. For example, at the end of June, China Construction Bank issued a 10-year US $2 billion secondary capital bond with an interest rate of 2.45%, which was the lowest issuing cost of capital instruments for Chinese banks in history, and the lowest issuing coupon for Basel III compliant secondary capital of global banks. On July 30, SGCC issued US $1.45 billion and EUR 1.6 billion of dual currency overseas bonds. Among them, the 5-year and 10-year interest rates of US dollar bonds are only 1.138% and 1.769%, while the interest rates of 6-year and 12-year bonds of Euro bonds are only 0.797% and 1.303%, respectively.
in addition to the liquidity environment in overseas markets which is favorable for the issuance of US dollar bonds, the United credit research report also believes that the stabilization of RMB / US dollar exchange rate fluctuation helps to reduce currency exchange risk and enhance the issuance willingness of many potential Chinese dollar bond issuers. At the same time, in March this year, the safe raised the macro Prudential adjustment coefficient of full caliber cross-border financing from 1 to 1.25, which increased the space for enterprises to borrow foreign debts from twice the original net assets to 2.5 times, established a green channel for foreign exchange policy, and enterprises can apply for foreign debt registration online. These measures have facilitated the issuance of Chinese funded US dollar bonds and promoted the Chinese dollar bond market in April After falling into the trough, it recovered rapidly.
on the one hand, Chinese enterprises are scrambling for the low interest rate issuance window; on the other hand, the investment enthusiasm of overseas investors in Chinese dollar bonds is also rebounding. At present, the supply and demand of Chinese funded US dollar bonds are booming.
subscription multiples or orders usually reflect investors’ acceptance of bonds. Since July, most of the subscription multiples of the issuance of Chinese funded US dollar bonds have been more than three times, and some will even be as high as 10 times. [5.8 billion] at the end of the initial order book and the peak value of US $888.7 billion of bonds issued by China CITIC at the end of its initial order book [USD 888.7 billion] and the peak value of US $8.87 billion in the end of the order book, which was close to the peak value of US $8.87 billion in the initial order book and euro [6.87 billion] of the total investment price of China CITIC bonds.
among the high-yield bonds, real estate is still the preferred investment target for overseas investors. Country garden issued a total of US $1 billion of two-year bonds on July 28, of which the final price of 5.5-year bond was 4.2%, and the final price of 10-year bond was 4.8%, which were all lower than the initial price. The issuance attracted more than 200 investors from Asia and Europe to subscribe, and the peak value of issuance book reached 7.5 billion US dollars.
Fang Zhongrui said that among the investment grade bonds, issuers with large amount of Chinese capital have realized low issuance premium, reflecting the enthusiasm of overseas investors to participate. Among the high-yield bonds, real estate issuers account for a large proportion, and have been favored by overseas investors. Because investors believe that in the Chinese dollar bond market, the qualification of real estate issuers among private enterprises is relatively good, and the relevant investment index has returned to the level before the epidemic. This year, due to the impact of the epidemic on the economy, as well as the impact of the sharp fluctuations in international oil prices, the issuance of US dollar bonds by Chinese industrial private enterprises has declined significantly, and investors are also relatively cautious. Despite this, opportunities remain.
looking forward to the overseas bond issuance environment of Chinese funded enterprises in the second half of the year, it is expected to continue the current situation of booming supply and demand under the background that monetary policy of European and American central banks is difficult to be tightened in the short term.
Yang yewei, a fixed income analyst at Guosheng securities, said that the overall environment of the Chinese dollar bond market improved in the second half of the year. In terms of funds, in order to ease the growing downward pressure on the US economy, the Federal Reserve has issued intensive monetary policies and used a variety of monetary instruments since March this year. It is expected that the monetary easing policy will continue in the second half of this year until the economy basically returns to normal level. In terms of market sentiment, the standard & Poor’s 500 volatility index has fallen back to the level in early March after experiencing a surge during the epidemic, and the market sentiment has been eased to some extent. In terms of domestic fundamentals, with the gradual control of the domestic epidemic situation and the orderly progress of returning to work and production, the economic growth rate in the second half of this year is expected to be significantly better than that in the first half of this year. Loose global liquidity, increased risk sentiment and domestic fundamentals will drive the interest spread of Chinese dollar debt to continue to narrow in the second half of the year.
Fang Zhongrui said that nearly 30% of the investor structure of Chinese funded US dollar bonds are asset management institutions such as overseas fund companies. Their investment in emerging markets is often affected by geopolitical risks and financial market emergencies. Therefore, when judging the marginal changes in the Chinese dollar bond market, we will pay more attention to the capital flow of overseas fund companies. Since May, the investment scale of overseas funds flowing into emerging markets has been very considerable. In August, it has been a wait-and-see downturn in the market. At this time, fund companies rarely adjust large-scale investment positions and investment strategies. However, it is expected that the relevant allocation will gradually follow up after entering the third quarter.
“under the influence of the European economic stimulus plan and the US Federal Reserve’s loose monetary policy environment in the short term, international investors are more optimistic about the investment environment in the third quarter, and overseas funds will still have a large allocation demand. However, in the fourth quarter, with the white hot election in the United States and increasing uncertainty, it is still difficult to judge the market trend. ” Fang Zhongrui said.
according to the joint credit research report, if the global macroeconomic situation remains stable in the second half of the year, the overall issuance scale of investment grade bonds of Chinese funded US dollar bonds is expected to continue to rise compared with the same period last year; supported by factors such as the recovery of the US dollar bond market and policy support, the issuance scale of the high-yield sector of the Chinese funded US dollar bond is expected to rise marginally in the second half of the year, and the market financing willingness of the high-yield entities will also increase Possible marginal improvement. Constellation