Beijing sold dollar debt directly to US buyers for the first time. A $ 6 billion offer saw record demand amid China's economic recovery from the coronavirus and despite tension with Washington.
The billions of dollars in bonds the Chinese Treasury Department sold Thursday resulted in orders worth more than $ 27 billion, or around $ 10 billion more than an offer of the same size last year, the bankers said.
The move by the Chinese government to approach US investors directly just weeks before a presidential election reflects confidence that calls to decouple the world's two largest economies are unlikely to bring significant change, analysts said.
Bankers involved in the sale of bonds said demand in the US was strong, with around 15 percent going to American investors.
Investors were drawn in part by the high yields on Chinese bonds compared to those of the US government.
The bond sales were "well received by US onshore real money investors," said Samuel Fischer, head of China's onshore debt markets at Deutsche Bank, who helped organize the deal.
Unlike the previous issue, the debt was sold under 144A / Reg S terms, which gave US institutional investors the opportunity to buy in for the first time.
"Given the general market background of US-China relations, not many people probably expected to make a 144A," said one banker. However, friction between Beijing and Washington had "no effect at all" on demand from US buyers, which included an American pension fund, the banker added.
Bankers pointed to the strength of China's economic recovery from the coronavirus compared to other countries as a reason for the strong demand. "This is the investor community showing confidence in the [China] recovery," said another banker of the sale, adding that "it will not diminish US investor stakes in Chinese stocks in any way."
The Chinese bonds had terms of three, five, 10 and 30 years with coupons of 0.40, 0.55, 1.20 and 2.25 percent, respectively. The yield on the 10-year bond was about 0.5 percentage points above the corresponding tenor of the US Treasury.
Tensions between the two powers have been fueled by China's crackdown on Hong Kong, while US President Donald Trump blames Beijing for the global spread of Covid-19.
Frances Cheung, head of macro strategy for Asia at lender Westpac, said the issue indicated that Beijing believes restrictions on access to dollar funding are "very unlikely" for Washington.
Hayden Briscoe, head of fixed income for Asia Pacific at UBS Asset Management, said the bonds would help set the benchmark for Chinese companies like petrochemicals Sinopec and Sinochem, which also borrow in dollars.
"Much of their spending is in US dollars, and they borrow in the dollar market to adjust funds," he said.
He added that the bonds benefited from strong demand, partly because of their scarcity value. "There are so few of them, and they are suitable for SWF-type buyers – they usually just go away," he added.
Other arrangers of the bond sales were Standard Chartered, Bank of America, Citigroup, Goldman Sachs and JPMorgan.