On 18 November, the Ministry of Finance of the People’s Republic of China (MOF) successfully priced €4bn of sovereign bonds, comprising €0.75bn 5-year bonds (yield: -0.152%), €2bn 10-year bonds (yield: 0.250%) and €1.25bn 15-year bonds (yield: 0.625%). Following the €4bn sovereign bonds issued by the MOF last year with a tenor of 7 years, 12 years and 20 years, respectively, this issuance further improves the yield curve of the euro-denominated sovereign bonds of the PRC government and provides an important benchmark for euro financings and pricing by Chinese enterprises.

This issuance has attracted an order book of nearly 4.5 times the issue size from international investors. The 5-year euro sovereign bonds have been priced with a negative yield due to the strong demand during the bookkeeping and filing stage, and the narrowing of the price range exceeding expectations. This is the first euro-denominated bonds issuance by an issuer in Greater China with a negative yield. The successful issuance is a testament to the strong confidence of international investors in the sovereign credit of China and will help promote the economic and financial cooperation between China and Europe.

This is the first time the MOF has simultaneously listed on the London Stock Exchange ISM, Luxembourg Stock Exchange’s Euro MTF market and the Hong Kong Stock Exchange. The Hong Kong Central Settlement System (CMU) was adopted as the main clearing system for the 5-year euro sovereign bonds, and is the first time that the MOF has selected the CMU as the main clearing system for its non-renminbi denominated bonds offering – demonstrating the PRC government’s strong support for the development of the financial infrastructure in Hong Kong SAR. The Linklaters team provided a seamless service in representing the MOF on all communications and co-ordination between the CMU, the settlement bank and the fiscal agents as well as drafting all the documentation.

As the international legal advisor to the MOF, Linklaters advised on the issuance through a joint team across their Hong Kong, London and Luxembourg offices, providing a seamless service from the preparation of the transaction documents, to liaising with the CMU and listing the bonds in London, Luxembourg and Hong Kong.

Linklaters has been the international legal advisor to the MOF since 2009, providing legal services on all its sovereign offerings targeting international investors. In October this year, Linklaters also acted as the international legal advisor to the MOF on its landmark 144A/ Reg S US$6bn sovereign bond offering.

Linklaters’ capital markets partner and Head of China, William Liu, commented:

“We are honoured to have been the international legal advisor to the MOF for the last eleven years and take great pride to once again be the only foreign institution that has participated in all of its sovereign bond offerings since 2009. This €4bn bond offering once again shows the strong confidence of the market in the economic development of China, despite the global pandemic and economic downturn. We are honoured to be able to assist the MOF in this successful landmark euro-denominated sovereign bond issuance would like to extend our sincere gratitude to our client for their continuous trust in us. Linklaters will continue to facilitate the Chinese economic reform and the financial connection between China and the world, as well as the development of Hong Kong’s financial infrastructure.”

The transaction was led by capital markets partner William Liu, with support from counsel Karen Cheng and managing associate Allen Zhang.