China Economic Scan Weekly Debt Market Review

The CSI Enterprise Bond Index started the week at 117.36 and crept up slightly to 117.41. The Shenzhen Corporate Bond Index started the week at 130.84 and declined steadily during the week, hitting a low of 130.40, and ending at 130.49.

The CSI Enterprise Bond Index started the week at 117.36 and crept up slightly to 117.41. The Shenzhen Corporate Bond Index started the week at 130.84 and declined steadily during the week, hitting a low of 130.40, and ending at 130.49.

China’s Ministry of Finance (MOF) said Wednesday it would issue 27.76 billion yuan (4.06 billion U.S. dollars) of book-entry treasury bonds this week. The 10-year bonds have an annual interest rate of 3.02%, with payments half yearly; and the issue period will run May 7-11.

The MOF also said it would issue 50 billion yuan worth of T-bonds next week. The bonds include 40 billion yuan worth of 3-year bonds that carry a fixed annual interest rate of 3.73% and 10 billion yuan of 5-year bonds with a 4.00% annual interest rate.

The PBOC will step up its bill issuance in its open market operations in Q2 to at least 1 trillion yuan ($146.6 billion) to control the money supply, a market association forecast in its first-quarter report. That would mark a sharp rise from 560 billion yuan of bills the bank sold in Q1 and compares with a total of 951 billion yuan in central bank bills and 790 billion yuan in short-term bond repurchase agreements due to mature in Q2.

The PBOC will drain 80 billion yuan ($11.7 billion) from the money market on Tuesday through 28-day bond repurchase agreements, traders said. 193 billion yuan in central bank bills and repos is due to mature this week. Last week, the central bank net-injected 17 billion yuan into the market.

PetroChina, the world’s second largest company by market value, said it may need as much as 150 billion yuan (US$22 billion) in funds during 2009 to boost cash flow and maintain CAPEX and dividends. PetroChina raised 50 billion yuan through bank borrowings and a bond issue in Q1 and is seeking shareholder approval for another 100 billion yuan.

China Merchants Group, parent company of China Merchants Energy Shipping announced plans to issue 4 billion yuan ($586.5 million) of 10-year corporate bonds from May 8 to 14, which will pay a coupon of 4.35%. China Chengxin Ratings Agency assigned an issuer and bond rating of AAA. Funds raised from the issue will be used for container terminal construction projects in China.

China’s new bank lending in April was likely above 600 billion yuan ($87.8 billion), sharply lower than the record trillion-plus yuan loans in earlier months this year. New loans in March totaled 1.9 trillion yuan ($220 billion), with new lending for the first quarter totaling 4.58 trillion yuan ($670.6 billion).

Managing Director of China Economic Scan - a global providerof news analysis and research on the Chinese economy.