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

Market watch: Citigroup, HSBC and CIMB seek China bond trading license

Citigroup, HSBC and CIMB Group plan to apply to invest in yuan bonds following the People’s Bank of China’s decision to open its interbank debt market.

Andrew Au, the Shanghai-based chief executive officer of Citigroup’s Chinese unit, said the bank is working on the documents required for units outside China to invest in the market. HSBC is studying application procedures, it said.

Lee Kok Kwan, deputy chief executive of Kuala Lumpur- based CIMB, Malaysia’s second-largest banking group, said his company intends to apply. The Hong Kong Monetary Authority said it is investigating details of the program.

Overseas demand for the yuan has grown since China ended the yuan’s two-year dollar peg on June 19, giving the currency room to appreciate. The PBOC said on August 17 it would let overseas financial institutions invest yuan holdings in the nation’s interbank bond market to promote greater use of the yuan in global trade and finance.

“There will be a level of interest on the part of central banks and foreign participants,” Au said in a phone interview yesterday. “China is already the world’s second-largest economy based on government data in the second quarter. It would be logical for a lot of international players to be interested.”

The People’s Bank of China’s didn’t reply to a fax from Bloomberg seeking more details on the licensing procedures and the banks that have submitted applications.

Citigroup and Credit Agricole CIB said on August 18 that China opening up its bond market to foreign banks would enhance the currency’s potential as a foreign-exchange reserve asset.

(Agencies)