SHANGHAI - Shanghai publicized the bids for China's first ever local government bonds on Tuesday amid high subscription demand as part of the country's pilot project aimed at curbing the debt risks of cash-strapped local governments.

The Shanghai Municipal Finance Bureau will sell three-year fixed-rate bonds worth 3.6 billion yuan ($567 million) at a rate of 3.1 percent and five-year fixed-rate bonds worth 3.5 billion yuan at 3.3 percent, according to data from the China Government Securities Depository Trust & Clearing Co Ltd (CDC).

The three-year municipal bonds were 3.5 times subscribed while the five-year bonds were 3.1 times subscribed, driven by strong investment demand.

In comparison, the country's fixed-rate Treasury bonds traded on inter-bank markets on Monday had yields of 3.1504 percent for three-year T-bonds and 3.2998 percent for five-year T-bonds, CDC data showed.

The Ministry of Finance announced last month that the cities of Shanghai and Shenzhen and the provinces of Zhejiang and Guangdong will be allowed to issue bonds on a trial basis this year.

The nation's auditing agency said earlier this year that local government debt totaled about 10.7 trillion yuan at the end of last year, accounting for about 27 percent of China's gross domestic output in 2010.

About 80 percent of local government debt has been incurred through local government financing vehicles, which are mainly set up to fund construction projects and have come under fierce criticism due to being poorly supervised and managed.

Analysts expect giving local governments rights to sell bonds will help relieve their debt burdens and improve the transparency of their debts.