On Wednesday, the Chinese Ministry of Finance (MOF) issued 12 billion yuan ($1.67 billion) in bonds denominated in yuan in the Hong Kong Special Administrative Region (HKSAR), further strengthening the HKSAR’s position as a worldwide financial centre and the internationalization of the yuan.
According to the tender notice released by the Central Moneymarkets Unit of Hong Kong, the 12 billion yuan of bonds were issued via a tender on Wednesday and were split between two-year bonds worth 6 billion yuan, three-year bonds costing 3 billion yuan, and five-year bonds totaling 3 billion yuan.
On June 1st, 2023, the MOF stated that it will issue a total of 30 billion yuan worth of bonds in the HKSAR this year over four tranches, each with an issuance amount of 12 billion yuan, 6 billion yuan, 6 billion yuan, and 6 billion yuan.
The entire value of the most recent batch, which is the second issuance after the first batch released on June 14, is an increase of 6 billion yuan above the initially anticipated issuance size.
In an interview with the Global Times published on Wednesday, Zhao Qingming, a seasoned financial expert based in Beijing, said that the increased value of the second batch of bonds demonstrated the surging demand for yuan bonds in the market and that the sizes of subsequent batches might be adjusted according to supply and demand.
According to Zhao, the price benchmark for Hong Kong’s financial market may be established by using central government bonds issued in yuan, which have the greatest degree of credit, high liquidity, and low risk.
He said that increasing the regional pricing power and internationalization of the yuan via the issuing of yuan-dominated bonds in the HKSAR will elevate the city’s reputation as a global financial centre.
Eddie Yue, CEO of the Hong Kong Monetary Authority, said in June that the value of Hong Kong’s bond issuance in 2022, at 330 billion yuan, was roughly twice that of 2021.
The HKSAR has issued yuan Treasury notes with maturities ranging from one year to 10 years during the previous decade, with the issuance volume increasing from an initial 6 billion yuan to 30 billion yuan this year.