The Bank of China has become the first issuer to utilise the newly launched Yulan bond structure from Euroclear.
The issuance was priced at $500 million, with a tenor of three years and was four times oversubscribed.
The Yulan bond from Euroclear Bank, its international central securities depository (ICSD), is issued through the Shanghai Clearing House for international investors to benefit from real-time multi-currency delivery verses payment (DVP) settlement.
“In our role as one of the largest financial institutions in China, we are committed to supporting innovative initiatives that will benefit offshore and onshore bond markets and promote China’s ‘dual circulation’ development pattern,” said Zhou Quan, head of asset and liability management, Bank of China.
“We expect that this bond structure will yield further success and anticipate that this new generation of bonds will bring increased efficiencies and convenience to issuers and investors globally.”
Citi acted as the joint global coordinator and book runner on the inaugural issuance of Yulan Bonds, through its Euroclear membership.
To enhance client transactions, Citi has put in place the necessary arrangements to ensure seamless Legal Entity Identifier (LEI) registration for those investing in the bonds, as well as providing complete settlement services.
“We’re glad to be one of the first custodian banks to be able to facilitate Yulan Bonds for global investors. Citi has been a pioneer in China with a long history of supporting investors to access China as its capital markets open up,” said Harry Peng, head China and Hong Kong securities services, Citi.
Launched in December last year, the partnership with the Shanghai Clearing House provides Chinese issuers the ability to gain direct exposure to a wider foreign investor base and access a deeper liquidity pool.
According to Stephan Pouyat, global head of capital markets and funds services at Euroclear, the market infrastructure firm is seeing increased demand for this new issuance model.
“Through a shared goal of building a new issuance model that enables increased foreign investment into the market, we are seeing true demand for this service. For the first time, international investors have full Euroclearable access to mainland Chinese securities,” said Pouyat. “An issuance of this importance is a fantastic way to start 2021 as we continue to add momentum.”
Following the launch of the Yulan bond, Euroclear also announced the Origami bonds, a new set of foreign currency-denominated Japanese local bonds issued by domestic market participants.