China Launches $138b Long-Term Bond Sale to Boost Economy

China’s finance ministry has announced that it will commence the sale of highly anticipated long-term special treasury bonds worth one trillion yuan ($138.23 billion) this week, as part of Beijing’s efforts to stimulate critical economic sectors amid ongoing weakness. The bonds, which will span maturity periods of twenty, thirty, and fifty years, are scheduled to go on sale from May 17th. The news follows recent reports suggesting that the Chinese government will allocate 900 billion yuan ($126.98 billion) to fund infrastructure projects, including transportation networks and renewable energy initiatives, over the course of the next five years. In a statement, China’s Premier Li Qiang urged officials to maximise the benefits of the special treasury bonds, encouraging them to utilise the funds to advance key national strategies and reinforce essential security capabilities. Market participants have eagerly awaited details regarding the bond issuance since March, when the proposal was initially presented during the Chinese parliamentary conference. As anticipated, the announcement led to a modest decrease in bond yields, with the yield on thirty-year bonds dropping by two basis points to 2.55%, marking a 30-basis-point fall for the year so far. Zou Wang, an investment director at Shanghai Anfang Private Fund Management, noted that while the supply of bonds represents a negative price trend, it was already factored into market expectations. Furthermore, he observed that investors anticipate further action from the central bank, potentially taking the form of interest rate and reserve requirement reductions. The finance ministry revealed that 300 billion yuan worth of twenty-year bonds, 600 billion yuan worth of thirty-year bonds, and 100 billion yuan worth of fifty-year bonds will be distributed via various channels. The move comes against a backdrop of dwindling bank lending and a record low level of broad credit growth, as highlighted by official figures released earlier this week. In other developments, China’s economy expanded faster-than-expected by 5.3% in the first quarter, offering some respite to policymakers grappling with a real estate crisis and efforts to rein in local government debt. Nonetheless, indicators suggest that domestic demand remains fragile, casting doubt on overall momentum. Cash raised through the special bonds will be allocated to restore damaged areas and enhance urban flood management infrastructure in line with China’s efforts to bolster its resistance to natural disasters, according to state media. The Financial Times previously reported that Chinese authorities initiated measures to sell the extended-date bonds and requested guidance from financial institutions concerning pricing matters. (Sources: Reuters, China Securities Journal, China Daily, Financial Times, Yahoo News).