June 28, 2017 / 3:38 AM / a year ago

China policy bank announces bond for offshore investors ahead of Bond Connect

SHANGHAI, June 28 (Reuters) - China’s state-owned Agricultural Development Bank of China plans to issue yuan bonds to both onshore and offshore investors on July 3, coinciding with the country’s launch of a “Bond Connect” scheme to link its nearly $10 trillion bond market with overseas investors.

The Agricultural Development Bank of China (ADBC), one of China’s major policy lenders, announced the plan to issue 16 billion yuan ($2.35 billion) worth of fixed-rate bonds in Beijing late Tuesday on the website of the state-owned clearing house.

These bonds would mark the country’s first round of policy bank bonds issued specifically for offshore investors, with the planned issuance coming against the backdrop of the imminent launch of the long-awaited Bond Connect scheme.

While regulators have not said when the programme will begin, it is expected to be announced and launched to coincide with the 20th anniversary of the handover of Hong Kong from British to Chinese rule on July 1.

In its statement, ADBC said that it would issue up to 5 billion yuan each of one-year, three-year and five-year notes in the first round of tender targeting both onshore and offshore investors, and up to an additional 500 million yuan each of one-year and three-year notes in a second round for offshore investors only.

The one-, three- and five-year notes will yield 3.61 percent, 3.98 percent and 4.13 percent, respectively.

All bonds will be listed on the China Interbank Bond Market, and the proceeds will be lent to agriculture, farmers and rural areas, the statement said.

Policy bank bonds issued by China’s three policy banks - ADBC, China Development Bank and the Export-Import Bank of China - are viewed as sovereign credit.

$1 = 6.8015 Chinese yuan Reporting by Andrew Galbraith; Editing by Shri Navaratnam

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