Local currency bonds: Pandas make debut appearance
In another sign of the rapid modernization of China’s capital markets, the Asian Development Bank and the International Finance Corporation, the private sector arm of the World Bank, became the first foreign institutions to issue renminbi-denominated bonds, known as panda issues.
The ability to issue pandas will prove useful for institutions that already have significant exposure to China’s currency, or that plan to expand their operations on the mainland.
The ADB and IFC were two of the first three institutions granted permission to issue the bonds, alongside Japan Bank for International Cooperation, which has yet to issue. The ADB wasted no time in launching its offering once approval was obtained. The policy bank issued Rmb1 billion ($124 million) of bonds with a bullet maturity of 10 years, priced at par with an annual coupon of 3.34%. According to ADB, the issue, marketed by Bank of China International, was oversubscribed three times.
ADB intends to use the proceeds from its pandas to fund development projects in China by helping to reduce currency mismatches for borrowers that have no foreign exchange earnings.
ADB’s panda followed hot on the heels of the IFC offering, which was a Rmb1.13