People’s Republic of China’s €4 Billion Sovereign Bonds Offer

Linklaters advised the Ministry of Finance of the People’s Republic of China on the deal. Allen & Overy advised the joint lead managers.

The issuance comprised €1.5bn 3-year bonds (yield: -0.192%), €1.5bn 7-year bonds (yield: 0.216%) and €1bn 12-year bonds, (yield: 0.759%). Following the €4bn sovereign bonds issued by the MOF in 2019 with a tenor of 7-year, 12-year and 20-year, and the €4bn sovereign bonds issued in 2020 with a tenor of 5-year, 10-year and 15-year, this issuance further improves the yield curve of the euro-denominated sovereign bonds of the PRC government and establishes an important benchmark for euro financings and pricings by Chinese enterprises.

This issuance has attracted an order book of 4.3 times the issue size from international investors, including international organisations, central banks, sovereign funds and insurance companies. The 3-year euro sovereign bonds have been priced flat with the 3-year mid-swap rate due to the strong demand during the bookkeeping and filing stage. This is the second time a euro-denominated bond issuance in China has achieved a negative yield, following the 3-year euro sovereign bonds issued in 2020. This successful issuance is a testament to the strong confidence of international investors in the economic development of China and demonstrates China’s determination to further promote its opening to the international market. 

This is the second time the MOF has simultaneously listed on the London Stock Exchange’s ISM, Luxembourg Stock Exchange’s Euro MTF market and the Hong Kong Stock Exchange. The Hong Kong Central Settlement System (CMU) was adopted as the main clearing system for the 12-year euro sovereign bonds, and this is the second consecutive year that the MOF has selected the CMU as the main clearing system for its non-renminbi denominated bond offering – demonstrating the PRC government’s continuous support for the development of the financial infrastructure in Hong Kong SAR.

The Linklaters team was led by Asia Managing Partner William Liu (Picture), with support from managing associate Allen Zhang. As the international legal advisor to the MOF, Linklaters advised on the issuance through a joint team across their Hong Kong, London and Luxembourg offices, providing a seamless service from the preparation of the transaction documents, to liaising with the CMU and the Bank of England, and listing the bonds in London, Luxembourg and Hong Kong.

The Allen & Overy team advised Bank of China, Bank of Communications, China International Capital Corporation, BofA Securities, Crédit Agricole CIB, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Société Générale Corporate & Investment Banking, Standard Chartered Bank and UBS.

The Allen & Overy team comprised partners Agnes Tsang and Jaclyn Yeap supported by Jiayin Yu, Erica Lo and Gordon Ng.

Involved fees earner: Erica Lo – Allen & Overy; Gordon Ng – Allen & Overy; Agnes Tsang – Allen & Overy; Jaclyn Yeap – Allen & Overy; Jiayin Yu – Allen & Overy; William Liu – Linklaters; Allen Zhang – Linklaters;

Law Firms: Allen & Overy; Linklaters;

Clients: Bank of America Securities; Bank of China; Bank of Communications; China International Capital Corporation Limited (CICC); Crédit Agricole Corporate and Investment Bank; Deutsche Bank; Goldman Sachs; HSBC; JP Morgan; People’s Bank of China; Société Générale Corporate & Investment Banking; Standard Chartered Bank; UBS;

Giulia Di Palma

Author: Giulia Di Palma