A view of Victoria Harbor in Hong Kong Photo: VCG

The Chinese Ministry of Finance (MOF) issued a total of 12 billion yuan ($1.67 billion) of yuan-dominated bonds in the Hong Kong Special Administration Region (HKSAR) on Wednesday, in a move that further enhances the HKSAR's status as a global financial hub and the internationalization of yuan.

The 12 billion yuan of bonds were issued through a tender on Wednesday, comprising tranches of two-year bonds worth 6 billion yuan, three-year bonds worth 3 billion yuan and five-year bonds worth 3 billion yuan, according to the tender notice issued by the Central Moneymarkets Unit of Hong Kong.

The MOF announced on June 1, 2023 that it would issue a total of 30 billion yuan worth bonds in the HKSAR this year in four tranches, with issuance sizes of 12 billion yuan, 6 billion yuan, 6 billion yuan and 6 billion yuan, respectively.

The latest batch was the second issuance following the first batch issued on June 14, with the total value increasing by 6 billion yuan over the planned issuance size.

The HKSAR is the largest market for offshore yuan, and the increased value of the second batch of bonds demonstrated the surging demand for yuan bonds in the market, Zhao Qingming, a Beijing-based veteran financial expert, told the Global Times on Wednesday, noting that sizes of following batches might be adjusted according to the supply and demand in the market.

"Yuan-dominated bonds issued by the central government have highest level of credit as well as high liquidity and low risk, and can provide a pricing benchmark for Hong Kong's financial market," said Zhao.

He pointed out that the issuance of yuan-dominated bonds in the HKSAR will enhance the city's status as a global finance hub by boosting the region's pricing power as well as the internationalization of yuan.

Chief Executive of the Hong Kong Monetary Authority Eddie Yue said in June that bonds worth 330 billion yuan were issued in Hong Kong in 2022, nearly doubled the issuance size in 2021.

Over the past decade, the issuance scale of yuan Treasury bonds in the HKSAR has increased from an initial 6 billion yuan to 30 billion yuan this year, and the durations straddle from a single five-year period to two-year, three-year, and ten-year periods.

Global Times