2015-05-20

Jiangsu Sells Some Bonds

Jiangsu is one of the wealthier and better managed provinces in China. This is a good first step, but one of the easiest as well.
WSJ: China’s Jiangsu Sells First Provincial Bonds Under New Program
A Chinese province successfully auctioned bonds Monday, marking a major step in Beijing’s effort to restructure some one trillion yuan ($161 billion) of local-government debt.

The eastern province of Jiangsu sold all 52.2 billion yuan ($8.4 billion) of bonds it offered. The auction comes after the central government this year initiated a program in which local governments could issue new bonds to replace a portion of older, costlier debt that was maturing in 2015.

Jiangsu’s sale, the first by any province under the debt-replacement program, was an “affirmation of our debt by the market,” the local government said in a statement.

...“But whether the market will be enthusiastic about the bonds issued by provinces with weaker finances is still uncertain,” he said.

Still, Jiangsu had to scale back its offer. Originally, it had planned to sell 64.8 billion yuan of bonds. The province said it has a bond quota of 81 billion yuan for this year, suggesting it could return to the market and offer additional bonds.

China.org: Jiangsu issues $8b municipal bonds in debt-swap plan
Three-year securities were sold at 2.94 percent, five-year securities at 3.12 percent and seven-year and 10-year paper at 3.41 percent, according to the ChinaBond website.

The rates are close to the lower end of the reference range, and just one basis point above the Treasury rate, enabling the province to convert its previous high-cost liability into much more affordable notes.

The sale was closely watched by China's financial market as a barometer of the 1 trillion yuan of debt swaps and 771.4 billion yuan of municipal notes set to be issued this year. Premier Li Keqiang is trying to build a transparent municipal bond system to rein in local borrowing while maintaining infrastructure investment to help an economy growing at the slowest pace since 2009.

Some Chinese analysts think the bond issuance could have side effects such as constraining banks from holding other long-term debt and crowding out other investment.
今年首场地方债招标远低预期,机构称关注对利率债挤出效应
"Local debt has longer terms, illiquid, banks hold a large number of local government debt, no doubt, will increase duration of assets and reduce liquidity, while banks are dealing with market interest rates so liabilities have shorter duration, so objectively, because they're holding long-term local government debt, need to shorten the duration of other assets, other long-term nature of the interest rate should be lowered debt configuration. "CRE Securities research report that the latest bond team.

CRE said that local government debt curtain opened, the market is not open around the pressure supplied from the asset side of local government debt issuance have an enormous impact on the bank, and this effect may last for several years, not optimistic.

No comments:

Post a Comment