China’s Bond Issuance Hits New High in August

Time:2017-09-07   Source:National Business Daily Reported by Wang..

The National Financial Working Conference held earlier this year pointed out the financial industry should serve economic and social development, vowing to raise the ratio of direct financing. Bond issuance, an important way of direct financing, always captures attention from capital markets.

According to statistics from Wind Info, bonds issued in China reached RMB4.36 trillion in August, the largest ever amount issued in a single month, mainly driven by strong growth in treasury bonds and asset-backed securities (ABS).

Moreover, local government bonds issued in July and Augusts increased slightly year on year, reversing the downward trend in the first six months of 2017.

Net amount financed down to RMB1.09 billion

According to Wind Info, the value of bonds issued in August hit a new record with RMB4.36 trillion, representing an increase of 16.99% year on year and 10.83% over the previous month.

The amount of repayment reached RMB3.3 trillion, also hitting a new high. In contrast, the net amount financed was RMB1.09 trillion in August, down 39.83% month on month, ranking the fourth among the first eight months of 2017. The figure peaked at RMB1.81 billion in July from the beginning of this year.

Specifically, treasury bonds issued in August grew to RMB933.73 billion, accounting for 21.42% of total bonds issued that month; negotiable certificates of deposit reached RMB1,621.06 billion; local government bonds edged up to RMB469.735 billion; financial bonds worth RMB472.09 billion, corporate bonds worth RMB77.85 billion, and company bonds worth RMB144.389 billion were issued; medium-term notes reached RMB149.67 billion, commercial papers RMB257.8 billion, and government-backed agency bonds RMB26 billion; and ABS increased to RMB147.151 billion.

In particular, treasury bonds registered the highest growth rate of 196.87% month on month, an increase of RMB619.2 billion, mainly attributable to the special treasury bonds worth RMB600 billion issued by the Ministry of Finance at the end of August.

The Ministry of Finance announced on August 22 that the RMB600 billion special treasury bonds issued in the first batch in 2007 would be due on August 29, 2017, and by then, it would issue the same amount of special treasury bonds to designated banks. On August 29, the Ministry of Finance issued the bonds in two batches as scheduled. The first batch of bonds worth RMB400 billion are to mature in seven years, with a nominal interest rate of 3.6%, and the second batch worth RMB200 billion to mature in ten years, with a nominal interest rate of 3.62%. The bonds were listed and interest calculated from August 29, 2017.

Local government bonds see slight increase

The amount of ABS issued in August reached RMB147.151 billion, the largest since the beginning of 2017, representing an increase of 106.25% year on year and 126.44% over the previous month. The top five underwriters in August were China Merchants Securities, Tebon Securities, CITIC Securities, Guotai Junan Securities, and Huatai Securities, which underwrote RMB27.351 billion, RMB27.2 billion, RMB18.752 billion, RMB8.46 billion, and RMB6.722 billion, respectively.

Only Tebon Securities and CITIC Securities made into the top five lists for the second straight month. Tebon Securities mainly underwrote ABS under the administration of the China Securities Regulatory Commission (CSRC), such as “Huabei” and “Jiebei” both online consumer finance services provided by Ant Financial Services Group.

There are other changes worth attention. Compared to the first six months of 2017, local government bonds rebounded slightly in July and August.

Local government bonds issued in July and August totaled RMB1.32 trillion, a slight increase from RMB1.23 trillion over the same period of 2016. In August 2017, local government bonds plunged 44.43% compared to RMB845.308 billion in July, the largest amount issued in a single month since the beginning of 2017.

However, local government bonds issued in the first half of 2017 totaled about RMB1.86 trillion, down nearly 50% year on year. The sharp decrease is mainly caused by two factors, said Lou Hong, inspector of the Treasury Department of the Ministry of Finance. First, after a tremendous amount of debt-converting bonds had been issued in the past two years, outstanding debts of local governments in 2017 and beyond will decrease significantly, so debt-converting bonds issued this year is expected to decline notably compared to the previous year; and the second reason is that local fiscal departments have taken the initiative to adjust their progress and pace of bond issuance, he explained.

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