Luxembourg Stock Exchange hosts record-breaking Chinese sovereign issuance

China has issued €4 billion in euro denominated sovereign bonds in Luxembourg, the Chinese ministry of finance announced on Wednesday.

The issuance has proven popular among investors attracting demand 25 times the offer size.

The ministry issued the bonds in two tranches: €2 billion of four-year notes priced at 2.401% and €2 billion of seven-year notes at 2.702%, it said. The seven-year tranche alone was 26.5 times oversubscribed, with total orders reaching €100.1 billion.

Investors from Europe, Asia, the Middle East and offshore US accounted for 51%, 35%, 8% and 6% of allocations, respectively.

By investor type, sovereign entities subscribed 26% of the bonds, asset and fund managers took 39%, and banks and insurers 32%, according to the ministry.

The bonds will be listed on the Luxembourg Stock Exchange (LuxSE) and the Hong Kong stock exchange.

“This issuance reflects China’s commitment to international capital markets and the prominent role LuxSE continues to play as the leading listing venue for sovereign issuers when tapping into international bond markets,” said Julie Becker, CEO of LuxSE.

The euro deal comes shortly after the ministry issued US$4 billion in US dollar sovereign bonds, split between three- and five-year maturities.

That transaction was also heavily oversubscribed, reinforcing demand for Chinese sovereign paper at a time when many developed economies are issuing more debt and running wider fiscal deficits.

For Luxembourg, the latest sovereign issuance adds to a growing franchise in China-related listings. Last year, LuxSE became the first European exchange to list a €100 million “Yulan” bond, admitting an issue structured via the Shanghai Clearing House and Euroclear in collaboration with Orient Securities.

A Yulan bond – named after the Yulan flower, the official flower of Shanghai – is a Chinese corporate bond denominated in foreign currencies and issued through the Shanghai Clearing House.

The LuxSE has been a preferred venue of listing for Chinese issuers for several years. In 2011, the stock exchange became the first European market to list a “dim sum” bond, which is denominated in Chinese yuan. It now ranks among the leading global exchanges for such China-linked listings.