China has successfully issued $4 billion in dollar-denominated bonds, with a significant portion priced at yields comparable to U.S. Treasuries. This development underscores a notable increase in investor confidence in China’s economy, partly attributed to de-escalating trade tensions with the United States.
A Competitive Borrowing Landscape
China’s Ministry of Finance recently sold $2 billion of three-year dollar notes with no yield premium and $2 billion of five-year bonds priced just two basis points above similar-maturity U.S. Treasuries. This pricing strategy, which saw order books reach $118.2 billion, indicates a strong appetite from investors for Chinese debt. Analysts suggest that the attractive pricing, relative to secondary market trading, contributed to the high demand.
The issuance comes at a time when U.S.-China trade relations have shown signs of improvement following a key summit that resulted in an extended tariff truce. This easing of tensions appears to have bolstered investor sentiment towards Asia’s largest economy.
Strategic Objectives of the Issuance
Beyond meeting general government funding needs, this annual sale of dollar bonds serves a strategic purpose for China. Authorities aim to cultivate a deeper and more liquid yield curve in the U.S. dollar bond market. This development is intended to establish a clearer pricing benchmark for Chinese companies looking to raise capital internationally.
Serena Zhou, a senior China economist at Mizuho Securities, noted that the Ministry of Finance’s regular issuance of benchmark bonds helps improve the pricing and liquidity of Chinese entities in the USD bond market.
Rebound in Chinese Dollar Debt Sales
The successful sale also reflects a broader recovery in dollar-note issuances by Chinese firms. Following a period of unprecedented property sector challenges and interest rate hikes by the U.S. Federal Reserve, which led to a slump in issuance, publicly announced sales have reached approximately $90 billion for 2025. This figure is heading towards a three-year high, signaling renewed confidence and activity in this segment of the debt market.
Last year, China sold similar three- and five-year bonds at slight premiums to Treasuries, with demand largely driven by Chinese investors seeking higher returns in offshore markets. S&P Global Ratings has assigned an A+ long-term foreign-currency issue rating to China’s latest dollar-bond offering, further validating its creditworthiness.