Thndr Claps
  • U.S.
  • Egypt
  • Saudi
  • Thinkers
  • Arabic
No Result
View All Result
Thndr Claps

Thndr Claps » Thndr Thinkers💭 » Hany Genena » Panda Bonds

Panda Bonds

by Thndr Thinker
September 1, 2022

1. Panda bonds are a type of bond called “foreign bonds.”

2. Foreign bonds are bonds issued to investors in a particular country in the local currency of the country but by a foreign borrower.

Note: Foreign bonds are different from Eurobonds.

The Eurobond is a bond issued in a currency other than the borrower’s local currency. For example, Egypt issues a dollar bond, but it trades it in all global markets such as London, New York, and Singapore, for example.

Panda bonds, on the contrary, trade in the local bond market of a country along with government bonds and corporate bonds in the local currency of the country in which they are issued.
Example:
-The government of Spain issues US dollar bonds in the US bond market called “Yankee”.
-Thailand issues Japanese yen bonds to Japanese investors called “Samurai”.
-Egypt issues Chinese yuan bonds to investors inside China called “Panda”.

3. The first Panda bond was issued in October 2005 by the International Finance Corporation (IFC) of the World Bank and the Asian Development Bank to finance a number of development projects in China.

4. The reasons for issuing bonds in Chinese currency inside China are:
a) Most of the Panda bond issuers are subsidiaries of multinational companies operating in China (such as the subsidiary of Mercedes and BMW in China) and international financial institutions such as the IFC and the Asian Development Bank. The main reason is to avoid FX risk by issuing Yuan financing to finance projects, inside China.

b)The domestic bond market (denominated in yuan) in China is the second largest bond market in the world after the US. The higher the volume of issuance, the higher the trading volumes and the lower the required interest rate because the investor is able to liquidate the asset at any time.

c) The interest rates in China are slightly lower than their counterparts in the United States of America, as previously mentioned. While the yield to maturity on 10-year Chinese government bonds is currently about 2.65%, the yield on government bonds in the United States is about 3.1%.

d) The stability of the yuan against the dollar reduces the risk of exposure to the exchange rate of the exporting country in the case it decides to convert the yuan into another currency instead of spending it inside China. In this case, borrowing in yuan is similar to borrowing in dollars but at an interest rate slightly less than the dollar.

5. It is important to know that Panda bonds are assessed for their risks by Chinese evaluators and do not depend on the assessments of the American trio (Moody’s, Standard & Poor’s, & Fitch) except in exceptional cases.

6. In 2019, the Philippines issued 2.5 billion yuan ($365 million) of Panda bonds with a 10-year maturity and an annual interest rate of 3.75%, which is about 1.1% higher than the yield on US bonds prevailing at the time. It is worth noting that the Philippines’ sovereign assessment of the bond at that time was BBB+.

Note
The credit rating of most (if not all) Panda bond issuers since its inception in 2005 until now is an investment credit rating (BBB- or higher). Therefore the next offering by the Egyptian government may be the first from a country whose credit rating is lower than the investment rating according to the American trio.

  • Click to share on Facebook (Opens in new window)
  • Click to share on Twitter (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)

Related Posts

KIMA can export its entire production
Food & Beverage 🍕

Chipotle looking to recruit 🌮

by Omar El Shorafa
January 27, 2023
Intel, Chips, NASDAQ
Tech 📲

An underwhelming quarter from Intel 📉

by Omar El Shorafa
January 27, 2023
Tadawul launches Albilad MSCI US ETF 💵
Economy 🏢

US GDP grows despite recession fears

by Omar El Shorafa
January 27, 2023
Tech 📲

AT&T stock jumps 📡

by Omar El Shorafa
January 26, 2023
Claps, Tech, NYSE
Tech 📲

IBM tops estimates and plans job cuts 💾

by Omar El Shorafa
January 26, 2023
Claps, Tech, Automotive
Automotive 🚗

Tesla ended 2022 on a high 🔝

by Omar El Shorafa
January 26, 2023

Website

Community

Blog

Learn

© Thndr. All rights reserved

No Result
View All Result
  • U.S.
  • Egypt
  • Saudi
  • Thinkers
  • Arabic

Disclaimer: Thndr does not provide investment advice, individual investors are responsible for their own decisions or can seek independent advice. The value of investments can go up and down. Thndr is a trading name of Thndr Securities Brokerage which is authorised and regulated by the Financial Regulatory Authority (FRA). Registered in Egypt (no. 804)..© Thndr. All rights reserved

 

Hello👋 We want you to be able to express your opinions on anything and everything finance and economics related to the Egyptian and US markets.

This is why we introduced Thndr Thinkers💭

Let’s go through some housekeeping notes before you jump into publishing your article to all Thndr Claps readers!

Type of Content📝 We want to see market-relevant content that shows good analysis, please! Base your articles on facts 

Don’t be shy, explain🗣 Flex your knowledge to us, and we’ll share it with all the readers!

Be Original🙏 Please don’t copy. No one likes a copycat. All submissions are welcome as long as they’re yours 

Make your title attractive🤩 A title is like the cover of your book. Attractive enough to make you look at the book but also clear enough to tell you what the book is about.

Clean🧹 We’re all humans and we all make mistakes. But please try and clean up the article so it’s clear for all the readers 

No promotional content🚫 We don’t publish promotional content.

Any questions about becoming a Thndr Thinker? Email thndrclaps@thndr.app and we’d be happy to help!

Normally, your article will be published within 24 hours of submission (if you followed the guidelines)