Panda bond issuance more than doubles as rates fall

Panda bond issuance surged to 29 billion yuan ($4.33 billion) in the year to date in 2016, compared with 12 billion yuan in all of 2015, said a JPMorgan Chase & Co report.

The large increase in the issuance of Panda bonds, yuan-denominated bonds sold in the onshore market by a non-Chinese issuer, was mainly driven by cheaper funding costs. A typical corporate issuer with BBB+ rating could reduce its financing costs by around 80 basis points by issuing a Panda bond and then swapping China's onshore currency into dollars, compared with issuing dollar bonds, the report said.

"Dollar/yuan cross-currency swap rates have remained at relatively high levels due to investors' concerns about the yuan depreciation, which gives Panda bond issuers more attractive yields to swap their yuan into dollars," said Gu Ying, Hong Kong-based emerging markets strategist at JPMorgan.