BONDS: Central banks embrace IBRD Global Dim Sum
Central banks and official institutions were big buyers of the International Bank for Reconstruction and Development’s offshore renminbi bonds priced on Friday, new data shows. The issue was the largest such transaction in a 144A/RegS format to date
Central banks took 42% of the Rmb1.7bn (US$159m) one-year transaction. Banks and private banks booked 28%, fund managers and insurance companies came in for 30%. It was the latest sign that a growing number of central banks and official institutions were buying renminbi assets as part of their official reserves.
Geographically, investors from the Americas accounted for the bulk of 39%, with Europe and the Middle next at 34%, and Asia at 27%.
The bond was sold with a yield of 2%, on the spot of initial indications of 2% area announced on Thursday morning. The deal also marks the largest Dim Sum from either a supranational or an issuer from the Americas.
Investors swamped the deal on a hunger for high-grade renminbi paper. The supply has been very light so far this year due to unfavourable swap conditions in the first five months of the year.
Rarity value was obvious as IBRD was the first Triple A issuer in the Dim Sum market since KfW placed a Rmb500m (US$81m) two-year bond at 2% in early April this year.
In fact, the good reception of IBRD has lifted KfW paper, which was quoted at 2.062% this morning, tighter than the 2.068% seen on Friday and the 2.081% on Thursday.
Bankers and traders see the IBRD deal paving the way for a string of investment-grade issuers returning to the CNH market as the basis swaps have moved 20bp–30bp in their favour in the past few days.
At final pricing, the deal came in the low teens below Libor, assuming mid swaps. That was quite favourable to the issuer and it is believed that be cutting through IBRD’s US funding levels. Again, a good incentive for IG issuers to return.
It was announced as a benchmark-sized deal Thursday morning, although the market was circulating Rmb750m initially. Then, the books grew substantially during the Asian session and overnight. Eventually, the size was fixed at Rmb1.7bn.
HSBC was the sole bookrunner on the IBRD deal.
IBRD made its debut in the Dim Sum market in January 2011 with a Rmb600m two-year issue at 0.95%. The bond matured in January this year.