Hong Kong’s dim sum bond market hits new heights as State Grid deal draws record orders

Hong Kong's offshore yuan bond market witnessed a record-breaking deal, with State Grid Corporation of China issuing 14.9 billion yuan (US$2.2 billion) in dim sum bonds, as reported by Bank of China. The offering comprised three different maturities: 3.9 billion yuan of five-year bonds at a 1.86% yield, 7 billion yuan of 10-year notes at a 2.18% yield, and 4 billion yuan of 20-year debt at a 2.46% yield.

Investor demand for the deal was exceptionally strong, with orders totaling 193.8 billion yuan, which is over 13 times the amount on offer.

The growth of Hong Kong's dim sum bond market continued unabated, with nearly 500 billion yuan of offshore yuan bonds sold in the first seven months of the year according to Bank of China. The lender itself underwrote over 100 billion yuan during this period. Hong Kong Financial Secretary Paul Chan Mo-po revealed that annual dim sum bond issuance had reached 1 trillion yuan over the past two years, with the total outstanding bond size standing at approximately 1.6 trillion yuan.

State Grid's record-breaking offering signifies a broader expansion of the offshore market driven by lower yuan borrowing costs and growing investor demand. Dim sum bond sales surged by more than 60% year-on-year in the first half of the year, as borrowers increasingly opted for longer-dated debt at lower yields. This latest expansion began in 2022, marked by longer maturities, lower yields, and a wider range of issuers, marking a departure from the currency appreciation boom that occurred between 2011 and 2014.

The trend aligns with Beijing's ongoing efforts to deepen the cross-border use of China's currency and bond markets. At the end of July, overseas institutions held 3.21 trillion yuan of bonds in mainland China's onshore interbank market, accounting for 1.8% of the market. More than two-thirds of overseas investors entered via the Bond Connect programme, as per central bank data.