SHENZEN, CHINA: On June 3, Sichuan Provincial Government managed to issue its 30-year municipal bond by tender. It is the first super long-term bond of its kind that has hit Shenzhen Stock Exchange (SZSE), and also an active attempt made by SZSE to assist local financial authorities in promoting the innovation in municipal bonds.[the_ad id=”31605″]The Notice on ‘Doing A Good Job in the Issuance of Municipal Bonds’ released by the Ministry of Finance of China in April 2019 requires the local financial departments to determine the term structure of municipal bonds reasonably, with a view to meeting the term preference of more diversified investors and increasing the proportion of long-term bonds step by step.
For this time, Sichuan Provincial Government managed to issue by tender 12 tranches of bonds worth about CNY 33.66 billion at SZSE. Of these, the general bonds with a term of 30 years come in an issue volume of CNY 7 billion, and have an interest rate of 4.19%, up 25 basis points over the government bond benchmark. Well-received among members of the underwriting group, the bonds were subscribed by 15 times, of which the bonds that went to securities companies totaled CNY 3.39 billion or accounted for 57% of the total.
As at May 2019, there had been seven long-term municipal bonds with a term of 20 years that went public at SZSE, which amounted to CNY22.5 billion. Their issuance helped local financial departments and insurance agencies targeted at major long-term investors to establish a sound, stable supply and demand relationship with respect to funds.
To guarantee the 30-year bonds could be introduced smoothly, SZSE had in earlier stages conducted adequate market surveys, compared market demands for various terms of products, strove to diversify the types of investors in municipal bonds, and introduced long-term funds from such sources as insurance agencies vigorously. Thanks to all of these efforts, the ultimate bidding results were highly recognized by the issuer.
To date, municipal bonds available at SZSE have extended reach to 25 Chinese provinces, municipalities and autonomous regions. Their cumulative issue volume has exceeded CNY450 billion since 2019.
For the next step, the stock exchange will continue leveraging on the functions and advantages of capital market to support the innovation in municipal bonds, streamline the term structure of bonds, and cater to investors’ diverse demands.
While rendering customized services that cover all aspects and links of bond issuance, it is aimed to boost the high-quality development of the municipal bond market.