Loosened yuan bond market – McDonald’s sets benchmark for China with yuan bond sale

McDonald’s Corp’s yuan bond sale, the first by a foreign company in Hong Kong, may pave the way for a new global debt market as China seeks to capitalize on its status as the engine of the world’s economic recovery.

McDonald's has expanded faster in China than anywhere outside the US. IC Photo

McDonald’s, which opened its first 1,000 restaurants faster in China than in any other country outside the US, sold 200 million yuan of 3 percent notes due in September 2013. Bentonville, Arkansas-based Wal-Mart Stores, the world’s largest retailer, said in March it was considering selling bonds in yuan.

As the fastest-growing major economy, China changed its rules in February to let foreign companies issue yuan-denominated bonds through Hong Kong to strengthen its position as a financial center and promote the Chinese currency for global commerce.

Yuan bonds issued by Chinese companies have returned 6 percent this year, their best performance since 2005, according to a Bank of America Merrill Lynch index tracking 1.38 trillion yuan of debt.

“This is going to become a popular trend,” said Donald Straszheim, a Los Angeles-based senior managing director and head of China research at International Strategy & Investment Group. “There are hundreds of global companies wanting to do more business in China and they will want to be involved in the country’s evolving credit market.”