Offshore Renminbi Bond Markets: Achievements and Challenges
The article discusses the achievements and challenges of the offshore Renminbi bond markets, highlighting the role of foreign currency debt in public debt management, the development of the RMB market, examples of sovereign issuances, and the practice and goals of international FX. It covers the evolution of FX-denominated debt ratios, market volumes, and key sovereign issuances in the UK and France. The content emphasizes diversification, financing objectives, and the increasing importance of the Renminbi in global bond markets.
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Offshore renminbi bond markets achievements and challenges Gy rgy Barcza, CEO 26 March 2015
The The Role Role of of Foreign Foreign Currency Currency Debt Debt in in Public Public Debt Debt Management Management The ratio of FX-denominated debt has increased heavily since 2008 because of the IMF/EU loan (peak: 51%) significant FX-risk After 2010 major increase in households savings: reducing the FX-denominated debt ratio is an important objective FX issuance only in order to diversify the investor base (P M K, Residency Bond, new markets) The evolution of the FX-denom debt ratio 100% 90% 80% 49% 55% 55% 58% 59% 70% 61% 62% 71% 60% Forint 50% 40% FX 30% 51% 45% 45% 42% 41% 20% 39% 38% 29% 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015.03.26. 2
The The Development Development of of the the RMB RMB- -Market Market Market volume RMB 1900 billion RMB rapid development From which Bonds: ~ RMB 900 billion From which Government Securities and quasi-sovereign: ~ RMB 130-140 billion Volume of primary auctions 2013: RMB 402 billion 2014: RMB 587 billion 2015: RMB 480-500 billion (Standard Chartered forecast) Source: FTSE-BoCHK (HongKong) Offshore RMB Bond Quarterly Research Report, 2015 Q1 3
The The RMB RMB- -Market Market Examples Examples of of Sovereign Sovereign Issuances Issuances United Kingdom (14 October 2014) RMB 3 Billion (~420 m EUR), 2,7% yield, 3-year-maturity Syndicated auction, Stock Exchange listing: London Total Bid: RMB 5,8 billion 85 different investors: Asia (56%), US (8%), others (36%) Private and public banks (64%), central banks and other public institutions (17%), investment funds and others (19%) Purpose: Diversifying and financing a minor part of the official FX-reserves of BoE CADES, Frech Social Debt Fund (28 January 2015) 3 Billion RMB, 3,8% yield, 2-year-maturity Syndicated auction, Stock Exchange listing: Paris Total Bid : 4,6 billion RMB 39 different investors : Asia (42%), UK (24%), misc. EU (17%) Private and public banks (66%), central banks and other public institutions (24%), investment funds and others (10%) Purpose: Immediate swap to euro, general financing 2015.03.26. 4
The The Practice Practice and and Goals Goals of International FX of International FX Issuances Issuances Normal practice of AKK Longer maturities 5 10 years Size EUR/USD benchmark-size, Appearance in alternative markets Purpose General financing Refinancing FX-redemptions Immediate euro-swap (in compliance with the benchmark) Opportunities in the RMB-market Shorter maturities Mainly 1 3 years Size RMB 0,5-1,0 billion Purpose General financing or Official FX-reserves financing With or without euro-swap 2015.03.26. 5
Summary Summary The offshore RMB-market has experienced a constant and intensive expansion during the last couple of years. The offshore RMB bond market has also developed dynamically besides corporate bond and Chinese sovereign bond issuances there have been some sovereign bond issuances from the developed countries as well Issuance in the offshore RMB sovereign bond market could enable Hungary to further diversify its external borrowing sources. No CEE-countries have applied yet seize first-mover advantage We are constantly examining the RMB (sovereign) bond market. Issuing in the offshore RMB bond market could satisfy the goals of the broadly defined state (NBH and KK) all at once. 2015.03.26. 6
Thank Thank you you for for your your attention attention! ! 2015.03.26. 7
