HONG KONG, (Reuters) – China has launched a sale euro-denominated sovereign bond to raise 4 billion euros (4.62 billion). This sale comes three weeks after a U.S. Dollar bond sale raised $4 billion. Strong demand was evident.

According to Reuters’ Wednesday term sheet, China’s Ministry of Finance will issue the euro bond in three-, seven-, and 12-year tranches. According to the ministry, it issued 4 billion euros worth of debt in Hong Kong on October 29.

In an effort to better integrate China into the international financial system and establish a benchmark price for Chinese corporate bonds, Beijing regularly issues sovereign bonds overseas. Similar euro bond sales were made last year, and the first time Beijing had sold its first government debt in euro in over 15 years was in 2019.

China’s economy slows amid power shortages and rising raw materials prices. China’s dollar bond markets have plummeted due to concerns about contagion from China Evergrande Group debt issues.

Chen Jianheng from China International Capital Corp (CICC), the chief of fixed income analysis, stated that Chinese sovereign bonds continue to be attractive for global investors.

He said that China would likely relax its monetary policies to some degree, while the U.S. will tighten their monetary policy. Additionally, the yield spread narrowing between Chinese sovereign bonds, and those of the U.S., and European counterparts, means that investors are less at risk when buying Chinese bonds.

China’s 4 billion dollar sovereign bond offering last month attracted bids six times that amount. CICC also reported that the bonds were sold at record low spreads.

Initial pricing guidance has been provided for euro-denominated bonds at the middle swap rate and 20 basis points areas for 3-year, 7-year and 12-year contracts, according to the term sheet.

Chen, CICC, suggested China issue offshore sovereign debts more often and that the bond tenors be increased to improve the yield curve. It is a reference point for Chinese companies when pricing offshore issuance.

($1 = 0.8655 euros)