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How China’s bond markets were used to combat Covid-19

India setting the stage for bond index inclusion. Photo: Reuters.

(ATF) – Data from the China Bond Information Network shows how the bond market rapidly raised funds in February 2020 to fight Covid-19. ‘Epidemic bonds’, ‘war bonds’ and ‘special bonds’ were released at a rapid pace. After the initial shock of the virus outbreak was absorbed, bonds became a vital mainstay to control the economy and recover from the epidemic .

??1. On February 5, the Ministry of Finance successfully launched the first tender for national debt after the Spring Festival holiday, issuing a total of 44-billion yuan (US$6.35 billion) of book-entry interest-bearing national debt.

??2. On February 5, the Agricultural Development Bank successfully issued the first one-year Covid-19 crisis-themed financial bond on the global market with a one-year term for 5-billion yuan at the Central Clearing Corporation through public bidding. The issue rate was 1.8833%, which was high. The daily rate of return was 25 basis points lower; the subscription ratio was 13.41 times – a record high, which fully demonstrates a confidence and determination in the market to work together to win the fight against Covid-19 – to control the epidemic and prevent it spreading further.

??3. On February 6, the Export-Import Bank successfully issued 3 billion yuan of ‘Covid-19 crisis’ bonds in the interbank bond market with a maturity of 1 year and an interest rate of 1.61%, which was 50 basis points lower than the interest rate of financial bonds of the same maturity. All will be used for credit placement in areas related to epidemic prevention and control.

??4. On February 6, the China Development Bank successfully issued a 1-year 13.5 billion “epidemic war” bond with an interest rate of 1.65%. The funds raised will be mainly used for emergency financing provided by the CDB for epidemic prevention and control.

??5. On February 10, data released by the National Bureau of Statistics showed that in January 2020, the consumer price index (CPI) rose by 5.4% year-on-year and 1.4% month-on-month; the producer price index for industrial producers (PPI) rose by 0.1% year-on-year , unchanged from the previous month.

??6. On February 11, news from the Ministry of Finance showed that in 2019, the country’s general public budget revenue was 19,828.3 billion yuan, a year-on-year increase of 3.8%.

??7. On February 12, ChinaBond Financial Valuation Center Co Ltd released the ChinaBond 10-Year Policy Bank Bond Strategy Index, a component of the index that includes bonds that are publicly issued in China and the 10-year policy-bank bonds with a listing period of at least 7.25 years, which can be used as the performance benchmark and the underlying index for investing in such bonds.

??8. On February 18, Tianjin Bohai State-owned Assets Operation and Management Co Ltd successfully issued a 7-year corporate bond of 1.5 billion yuan at the Central Government Bonds Registration and Settlement Co Ltd, with an interest rate of 5.03%.

??9. On February 20, the January Financial Statistics Report released by the People’s Bank of China showed that at the end of January, the broad money (M2) balance was 202.31 trillion yuan, an increase of 8.4% year-on-year, 0.3 percentage points lower than the end of last month, and over the same period.

??10. On February 20, 99.988 billion yuan of government bonds in Hubei Province were successfully issued by the Central Government Bonds Registration and Clearing Corporation through the government bond issuance system.

??11. On February 26, Shanghai issued 29.5 billion yuan in government bonds through the government bond issuance system at the Shanghai Headquarters of the Central Government Bonds Registration and Clearing Co Ltd.

??12. On February 28, Hubei Communications Investment Group Co Ltd successfully filed a 5-year corporate bond at the Central Government Bonds Registration and Settlement Co Ltd to issue 3-billion yuan of corporate bonds, at an interest rate of 3.38%. These were the first country-issued corporate bonds to support epidemic prevention and control after the National Development and Reform Commission issued the “Notice on Doing a Good Job in Corporate Bonds During Epidemic Prevention and Control”.

??13. On February 28, the Bank of Communications,  as the sole lead underwriter, successfully issued the first 2020 ultra short-term financing bond of the National Energy Group Jiangsu Electric Power Co Ltd (outbreak prevention and control bond). This bond was the nation’s first single power-enterprise super-short-term epidemic prevention and control bond, and the Bank’s first single bond labelled as epidemic prevention and control.

Chris Gill

With over 30 years reporting on China, Gill offers a daily digest of what is happening in the PRC.


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