World Bank Issues First Yuan-Denominated Bond

The long march to the internationalization of the yuan has taken a step forward with the World Bank’s issuance of its first yuan-denominated bond. The Bank is raising 500 million yuan ($76 million) through its International Bank for Reconstruction and Development, with the AAA-rated bond maturing in 2013 and carrying a coupon of 0.95%. Doris Herrera-Pol, Global Head of Capital Markets at the World Bank says,

“This is a landmark transaction for the World Bank as it is the first World Bank issuance in RMB, and signals the strong interest of the World Bank in supporting the development of the RMB market.”

Last year, more than 40 billion yuan of yuan denominated bonds, so called dim sum bonds, were issued in Hong Kong as the market, established only the previous year, took off from virtually scratch. Some 30 issuers in 2010 ranged from the Chinese government and the China Development Bank to the Asian Development Bank and multinationals such as McDonald’s and Caterpillar.

In December, HSBC, the second largest foreign underwriter of dim-sum bonds, forecast that new issuance would more than double this year to 80 billion yuan. Another World Bank issue, to raise 100 million yuan for its private investment arm, International Finance Corp., is reported to be in the pipeline.