China issues US$8.2 billion in bills in Hong Kong to stabilise yuan amid trade tensions
Move is the latest in a series by China’s central bank that support Hong Kong’s status as a global hub for offshore yuan business
The People’s Bank of China (PBOC) completed the tender of 60 billion yuan (US$8.2 billion) worth of central bank bills in Hong Kong on Friday, marking the second time this year it has used the policy tool to stabilise the yuan amid tariff tensions with the US.
The sale comprised 40 billion yuan in three-month bills, which were nearly 3.4 times subscribed with a bid-winning coupon rate of 2.60 per cent, and 20 billion yuan in one-year notes, which were almost 3.3 times subscribed with a coupon rate of 2.32 per cent. The PBOC tendered the bills through the Central Moneymarkets Unit (CMU) of the Hong Kong Monetary Authority (HKMA).
The issuances aimed to “enrich Hong Kong’s high-credit-rating yuan financial products and improve Hong Kong’s yuan yield curve”, the PBOC said as it unveiled the move on Wednesday.
PBOC Governor Pan Gongsheng said last month that he would work with the HKMA, the city’s de facto central bank, to encourage “more high-quality enterprises to list and issue bonds in Hong Kong”, as well as issue yuan-denominated government bonds and central bank bills regularly.
“The issuance of yuan-denominated bills by PBOC, cleared through Hong Kong’s CMU, enables international investors to access [mainland China’s] government credit under market infrastructure governed by common law,” said Terry Yang, a partner at law firm Clifford Chance. The Chinese government was using the city’s unique features to enable continued international usage of the yuan, including the ability to use onshore Chinese bonds for collateral and repo-financing purposes, he added.