China’s first negative-yielding sovereign bond spurs investor rush

China’s first negative-yielding sovereign bond spurs investor rush

Buyers of European debt facing low interest rates at home pile into €4bn offering

China has sold its first negative-yielding sovereign bond, a euro-denominated deal that drew bumper demand from European debt investors facing record-low returns across the region.

The offering, which drew in about €18bn worth of orders for €4bn of bonds, is the latest sign that investors are rushing to gain exposure to China as it recovers from the pandemic more quickly than Europe or the US.

The bond sale by China’s finance ministry gave large institutional investors the opportunity to grab higher yields than those available in Europe, where central bank easing to cushion the economic blow of the pandemic has pushed interest rates to record lows.

Yield on the five-year, €750m bond issued by China was priced 0.3 percentage points above the benchmark mid-swap rate of minus 0.45 per cent, offering investors an effective interest rate of minus 0.15 per cent, according to a term sheet seen by the Financial Times.