The Ministry of Finance (MoF) of the People’s Republic of China returned to the US dollar bond market as it priced on October 19 a four-tranche transaction totalling US$4 billion that repriced the sovereign’s US dollar credit curve.

The Reg S/144A transaction consisted of a three-year bond amounting to US$1 billion, which was priced at 99.935% with a coupon of 0.75% to offer a yield of 0.772%. This was equivalent to a spread of 6bp over the US treasuries, or 29bp tighter than the initial price guidance of 35bp area.

The second tranche was a five-year bond amounting to US$1.5 billion, which was priced at 99.879% with a coupon of 1.25% and a re-offer yield of 1.275%. This represented a spread of 12bp over the US treasuries, or 33bp inside the initial market range of 45bp area.

The third tranche amounting to US$1 billion was for 10 years and was priced at 99.00% with a coupon of 1.75% to offer a spread of 23bp over the US treasuries. This was equivalent to a spread of 23bp over the US treasuries or 32bp tighter than the initial price guidance of 55bp area.

The final tranche was for 30 years amounting to US$500 million, which was priced at 97.824% with a coupon of 2.50% and a re-offer yield of 2.605%. This was equivalent to a spread of 53bp over the US treasuries or 32bp back of the initial marketing range of 85bp area.

Ignoring market chatter on the problems surrounding China Evergrande Group and other Chinese property companies facing defaults on bonds, the deal generated a total order book of US$23.2 billion across all tranches.

The five-year offering garnered the biggest demand at US$9.3 billion from 110 accounts, while the three-year bond attracted total orders in excess of US$6.4 billion from 88 investors. The 10-year bond generated orders totalling over US$5 billion from 115 accounts, while the 30-year bond accounted for US$2.5 billion worth of demand across 77 accounts.

Sovereigns, supranationals and agencies type of investors formed the backbone of the demand in the shorter-end tranches, while the 10-year and 30-year tranches attracted active participation from the US onshore accounts, notes Christophe Cretot, head of debt origination and advisory for Asia-Pacific at Credit Agricole CIB, which acted as a joint bookrunner and lead manager for the transaction.

“The MoF benefitted from pent-up demand for quality assets amid the elevated market volatility lately,” he adds. “This allowed the MoF to price inside its secondary curve and establish a liquid new benchmark for the other Chinese issuers to take advantage of.”

Apart from Credit Agricole CIB, the other joint bookrunners and lead managers for the transaction were Bank of China, Bank of Communications, China Construction Bank, China International Capital Corporation, ICBC, BofA Securities, Citi, CTBC Bank, Deutsche Bank, Goldman Sachs, J.P. Morgan, Mizuho Securities and Standard Chartered.