China's finance ministry plans to start raising 1 trillion yuan ($138 billion) in long-awaited, long-term special treasury bonds this week to raise funds it will use to stimulate key sectors of its flagging economy.
The finance ministry confirmed what four sources had told
Reuters earlier on Monday that the 1 trillion yuan ($138.23 billion) of special
government bonds would have tenors of 20 to 50 years and issuance will begin on
May 17.
The sources who have direct knowledge of the plans said 300
billion yuan worth of 20-year bonds, 600 billion yuan worth of 30-year bonds
and 100 billion yuan worth of 50-year bonds would be issued.
China's Premier Li Qiang on Monday urged officials to make
good use of the ultra-long special treasury bonds to support the implementation
of major national strategies as well as building security capabilities in key
areas, state media reported.
China would make coordinated arrangements for key tasks for
this year and the next few years, coordinate and make good use of conventional
and extraordinary policies, state media said.
The country would also better coordinate government
investment and social capital, the report said, citing Li, who chaired the
virtual meeting.
Market participants have been waiting for weeks for details
of the issuance pipeline of these special treasury bonds, which were first
announced during China's parliamentary conference in March.
Given the issuance was foreseen, news of the details caused
bond yields to slip slightly. The yield on 30-year bonds fell 2 basis points to
2.55%. It is down 30 bps this year.
Zou Wang, an investment director at Shanghai Anfang Private
Fund Management, said that while such a supply of bonds is negative for prices,
it had been priced in.
"In addition, the market now expects the central bank
to provide liquidity support through cuts in interest rates and reserve
requirements," he said.
The finance ministry said 30-year special bonds will be sold
in 12 tranches, from May 17 to Nov. 15. It said 20-year bonds will be sold in
seven batches beginning May 24, while 50-year bonds will be issued in three
tranches from May 17.
Details of the timeline come just after data showed new bank
lending in China fell more than market participants expected in April from the
previous month while broad credit growth hit a record low.
The expansion of outstanding total social financing (TSF), a
broad measure of credit and liquidity in the economy, slowed to 8.3% in April,
a record low, from 8.7% in March.
China's economy grew at a faster-than-expected 5.3% pace in
the first quarter, offering some relief to officials as they try to work
through a property downturn and curtail local government debt. However,
indicators show that demand at home remains frail, weighing on overall
momentum.
The Financial Times reported earlier in the day that Chinese
authorities had kicked off plans to sell the long-dated bonds and the People's
Bank of China (PBOC) had asked brokers for advice on pricing.