Bloomberg News

China Sells 5-Year Debt at Lower Yield Than Forecast on Slowdown

October 19, 2011

(Updates with analyst comment in third paragraph.)

Oct. 19 (Bloomberg) -- China sold five-year bonds at a lower yield than investors estimated as demand for sovereign debt rose amid signs the world’s second-largest economy is cooling.

The Ministry of Finance issued 29.3 billion yuan ($4.6 billion) of notes due 2016 at an average rate of 3.55 percent, according to a trader at a finance company that participates in government debt auctions. That compared with a median estimate of 3.58 percent by seven fixed-income analysts and traders in a Bloomberg News survey. China’s economy grew 9.1 percent in the third quarter from a year earlier, the slowest pace since 2009, government figures released yesterday showed.

“There are strong expectations in the bond market that China’s economy will slow further,” said Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai. A “bull market is under way” for fixed-income investors, he said.

The highest winning-bid yield at today’s debt sale was 3.57 percent, according to the trader. The auction drew bids for 1.71 times the amount on offer, up from 1.11 at the last auction of similar-maturity securities on Aug. 3.

In the secondary market, the yield on the 3.44 percent government bonds due June 2016 climbed two basis points, or 0.02 percentage point, to 3.60 percent, according to the Interbank Funding Center.

The finance ministry in January published a list of 59 underwriters required to bid at its bond 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: Anil Varma, Simon Harvey

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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