(Bloomberg) — China is marketing a dollar bond sale in Hong Kong for the fifth straight year, even as strains emerge in the credit market amid deepening concerns over the financial health of the country’s property developers. 

The Ministry of Finance said Sept. 30 it would sell a combined $4 billion of dollar bonds through a 4-tranche deal, less than last year’s $6 billion sale. A person familiar with the matter said Tuesday that initial price guidance is as follows, with premiums over Treasuries lower than the initial indications on last year’s deal: 

This debt offering is a measure of investor confidence at a time where China-specific risk have flared. A regulatory clampdown on the nation’s real estate sector and a debt crisis at major developer China Evergrande Group future have sent shock waves through the country’s credit markets. 

According to Bloomberg, yields on dollar junk bonds rose to 20% recently, their highest level in 10 years. This is because investors are pricing in rising default risk for Chinese borrowers. Still, demand has historically been strong for China’s sovereign debt offerings, which carry investment-grade ratings. A flood of liquidity from the central bank since the pandemic reduced financing costs for many borrower around the globe.  

After a thirteen-year absence, China returned to the dollar bond markets in 2017. It’s since been an annual visitor and met with strong demand. Through 2020, it sold $17 billion in debt and 8 billion euros (roughly $9.3 billion) bonds.

This year’s sale continues its reach to institutional U.S. investors. The Ministry of Finance broadened the breadth of potential buyers last year with China’s debut issuance of so-called 144A notes.

A fax to Bloomberg News asking for comments about the bond sale was not returned by the ministry.

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