Analysts believe new yuan bills to boost yuan business in HK

HONG KONG - The latest issuance of bills denominated in yuan by the People's Bank of China (PBOC) in China's Hong Kong Special Administrative Region will boost Hong Kong's role as offshore yuan business center, analysts said.

China's central bank said in a statement on Wednesday that it has auctioned 20 billion yuan ($3 billion) in three-month and one-year bills in Hong Kong and the notes were six times oversubscribed, indicating high market demand for such issuance in Hong Kong.

The central bank issued 10 billion yuan in three-month bills at a coupon rate of 2.45 percent and 10 billion yuan in one year bills at a coupon rate of 2.8 percent in Hong Kong.

The move was aimed at expanding the range of yuan-denominated financial products of high credit rating in Hong Kong and improving the yuan yield curve in the region, said the PBOC statement.

The PBOC sold its first yuan-denominated bills in Hong Kong to raise 20 billion yuan in November last year.

Hong Kong Monetary Authority's spokesperson welcomed the issuance, saying it can boost the development of offshore yuan business in Hong Kong, as well as strengthen Hong Kong's position as the global hub for yuan trade settlement.

The issuance of bills can enrich the offshore market with more high rating yuan products and improve yield curve, as well as provide more choices for local banks to manage yuan liquidity, the spokesperson said.

Cheng Shi, chief economist at ICBC International, said the coupon rates for the two notes were lower in the issuance than the previous one, but the market is still active, indicating that investors are positive towards such yuan products.

George Yang, chief economist at Prime China Securities, said the notes were six times oversubscribed this time, much higher than the 3.8 times last time, indicating climbing demand for such bills, believing this can boost yuan-denominated assets.