The UK on October 14 became the first overseas sovereign to issue offshore renminbi bonds, pricing a three billion renminbi offering that represented a key milestone in the development of this market which illustrates its potential as a global hub for the Chinese currency.

The Reg S three-year deal was priced at par with a coupon of 2.70%, or at the tight end of the final price guidance of 2.75% (+/- 5bp) and 20bp inside the initial guidance of 2.90% area. While the UK government carries a rating of Aa1 from Moody’s, AAA from Standard & Poor’s and AA+ from Fitch, the issue is not rated.

The transaction, issued through The Lords Commissioners of Her Majesty’s Treasury on behalf of the UK government, garnered a total order book of over 5.8 billion renminbi from 85 orders with 57% of the bonds sold in Asia, 36% in Europe, the Middle East and Africa, and 7% in the Americas. By type of investors, banks accounted for 64%, fund managers 19% and central banks/official institutions 17%.

Spencer Lake, global head of capital financing at HSBC, which acted as one of the joint lead managers for the transaction, says the large size of this benchmark issue as well as the rare and high quality nature of the issuer make this a historic transaction and a testament to the UK’s pioneering approach.

“As the first sovereign outside of China to issue in the fast-growing offshore renminbi bond market, the resounding success and overwhelming response from international investors for this landmark issue clearly demonstrates the UK’s commitment to be the leading Western hub for the renminbi and signals the renminbi’s importance as a potential global reserve currency of the future,” adds Lake.

Bank of China and Standard Chartered were the other joint lead managers for the transaction.

The issuance of dim sum bonds is expected to pick up again in the fourth quarter of 2014 after a relatively quiet period in the third quarter.

According to a Fitch Ratings report on October 14, the total dim sum issuance in US dollar terms fell 65% to US$4.1 billion in the third quarter this year from the record level of US$11.7 billion in the previous quarter.

Fitch views the third quarter performance as a seasonal low, consistent with the 2013 case when the dim sum bond issuance amounted only to US$1.1 billion during the period. However, the issuance rebounded strongly in the fourth quarter of 2013 with the total volume of US$7.1 billion.

So far in 2014, dim sum issuance has already reached US$27.1 billion in the first three quarters of 2014, which already exceeded the whole 2013 total of US$20 billion. Fitch expects the dim sum bond market to continue growing at a steady pace, underpinned by the Chinese government’s efforts to internationalize the renminbi, increasing willingness by the exporters to China to accept renminbi-denominated payments and the rising number of global financial centres offering renminbi clearing and settlement infrastructure.