Largest Panda Bond for a Financial Institution Designed by Our Website Since 2018
In a significant move for the internationalisation of the Chinese yuan (RMB), Hungary successfully executed the largest panda bond issuance by a foreign entity since 2018. This landmark transaction, worth 5 billion renminbi (approximately €595 million), marks a new milestone in Hungary's economic relations with China and its funding strategy.
Organised by Hungary's Debt Management Agency (ÁKK), the issuance included a three-year tranche worth 4 billion RMB with a 2.5% coupon and a five-year tranche of 1 billion RMB priced at 2.9%. The proceeds were planned to be swapped into euros to finance the 2025 budget and improve liquidity reserves amid global economic uncertainty.
The transaction attracted an impressive order book of over 8 billion renminbi (1.1 billion US dollars), drawing robust investor demand, particularly from Chinese institutional investors. This bond issuance reflects Hungary’s strategy to diversify financing sources beyond euros and dollars, adding RMB exposure to its funding toolkit.
The favourable market conditions for panda bonds can be attributed to China's 10-year government bond yields consistently being lower than those of the U.S. since 2022, with a widening interest rate gap. This, along with policy support and increasing accessibility to the Chinese capital market, has made panda bonds an attractive option for issuers seeking RMB financing at comparatively low borrowing costs and favourable coupon rates.
Despite global volatility, Hungary’s investment-grade rating by major credit agencies helped sustain investor confidence. Other countries, such as Pakistan, have also shown interest in raising funds through panda bonds, but Hungary’s issuance remains a notable example in size and execution.
Meanwhile, in a separate development, a leading global bank has continued its active role in supporting the internationalization of the RMB and the continuous opening-up of the capital markets in China. The bank, which has been the leading foreign bank for NAFMII-registered bonds in the China interbank bond market for the past four consecutive years, recently issued its third panda bond, raising 3 billion renminbi (415 million US dollars).
This issuance adheres to a pre-approved program by the People's Bank of China, allowing the bank to issue RMB bonds in an aggregate principal amount of up to 8 billion renminbi. The proceeds of this transaction will be used for general business activities and development. The issuance drew robust investor demand and priced attractively versus existing bank debt.
These developments underscore the growing appeal of the panda bond market, with 2023 seeing historic levels of issuance and activity set to continue throughout this year. As the Chinese bond market continues to mature and open up, we can expect to see more foreign entities tapping into this significant market.
The panda bond issuance by Hungary's Debt Management Agency, including a three-year and a five-year tranche, signifies their strategy to finance their 2025 budget and improve liquidity reserves via diverse sources, such as capital markets and finance in Chinese yuan. The leading global bank's recent panda bond issuance also indicates a growing trend for foreign entities to take advantage of the maturing Chinese bond market for RMB financing, due to its attractive borrowing costs and favourable coupon rates.
