Bloomberg News

China Sells 10-Year Bonds at Lower Yield Than Estimated

September 21, 2011

(Adds analyst comment in third paragraph.)

Sept. 21 (Bloomberg) -- China’s finance ministry sold 10- year government bonds at a lower yield than estimated as concern the economy will be hurt by Europe’s debt crisis spurred demand for the safest assets.

The Ministry of Finance issued at least 30 billion yuan ($4.7 billion) of 10-year bonds at an average yield of 4.0735 percent, according to a trader at a finance company that participates in government debt auctions. That compared with the 4.09 percent median estimate in a Bloomberg News survey of 10 fixed-income analysts and traders.

“If Europe can’t deal with the debt crisis properly, it will hurt China’s economy,” said Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai. “Cash supply hasn’t got that tight in the bond market because of the bad performance of stocks.”

The International Monetary Fund yesterday cut its China growth estimate for this year to 9.5 percent from 9.6 percent. The 2012 forecast was lowered to 9 percent from 9.5 percent, according to the Washington-based lender.

The highest winning-bid yield at today’s sale was 4.1002 percent, said the trader. The auction drew bids for 2.05 times the amount of debt on offer, up from 2.03 times at the last sale of similar-maturity securities on Aug. 17.

The yield on the 3.94 percent government bond due January 2021 dropped one basis point, or 0.01 percentage point, to 4.09 percent as of 11:14 a.m. in Shanghai, according to quotes provided by the Interbank Funding Center.

The finance ministry in January published a list of 59 underwriters required to bid at its debt sales, including Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp., China Citic Bank Corp., Postal Savings Bank of China, Industrial Bank Co., Guotai Junan Securities Co. and BOC International (China) Ltd.

--Judy Chen. Editors: Andrew Janes, James Regan

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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