The Paris branch of Bank of China sold its debut renminbi-denominated bond for Rmb2 billion ($328 million) this week, furthering China’s push to globalize its currency and pouncing on favorable investor sentiment following upbeat economic data.
Bank of China’s bond came hard on the heels of China's PMI, which hit a six-month high, softer CPI inflation, as well as improved PPI data. Also there was no competing supply of renminbi bonds in the market.
The transaction had two- and five-year tenors with initial price guidance of 3.6% and 4% respectively on Monday afternoon Hong Kong time. The books stayed open for 11 hours with pricing tightening to 3.35% and 3.85% due to strong interest from investors.
The overall book was 3.65 times covered by 158 accounts, the strongest demand ever for any offshore renminbi bond issued by Bank of China in terms of multiple times covered.
The two-year Rmb1.5 billion tranche was 3.3 times covered with orders from 104 accounts. Funds bought 42% of the notes, banks 35%, corporates 16% and private banks 7%. The Rmb500 million five-year note attracted subscriptions of Rmb2.3 billion, of which banks took 68%, funds and insurance companies 26% and private banking accounts 6%.
The deal, the first bond issued by the bank in Paris, comes amid mounting expectations that France will soon have its own renminbi clearing bank. London and Frankfurt set up their clearing banks in June. A renminbi clearing bank is an important step towards boosting usage and trades in the currency.
“China and France have a long history and sizeable trade flow which will ultimately materialise in renminbi flows. French companies have a natural need for renmimbi to finance onshore projects in China. The offshore renminbi markets have created an express highway to finance these projects,” Benjamin Lamberg, global co-head of MTNs & private placements and Asian Syndicate with Credit Agricole CIB told FinanceAsia.
“On the asset side, many more French investors hold CNH either directly or on behalf of clients and this liquidity needs a home – hence the increasing part of CNH bond being placed with European institutions. The French authorities have also highlighted the importance of Paris becoming an important CNH,” said Lamberg.
European investors took more than one-third of the Bank of China bond.
From the perspective of issuers, the renminbi bond market expects “more supply from Chinese banks, given new offshore centres in Europe,” according to HSBC’s analyst Crystal Zhao.
Proceeds of the bond will be used for general corporate purposes. Bank of China, BNP Paribas, Credit Agricole and HSBC jointly arranged the deal.
