Dollar-Bonds Are a Hit in China’s Fixed Income Market

As China continues to rebound from the Covid-19 pandemic, more investors are interested in their dollar-bonds. The demand for these dollar bonds are reaching fever pitch as the country continues to recover.

Per a recent Bloomberg article, the number of orders for “Chinese offerings rose to 7.6 times their issuance size in August, the highest ratio since Bloomberg began collecting available deal statistics in 2016. Bonds of all Asian issuers, excluding Japan, were 6.8 times subscribed, the highest since March 2019, the data show.”

“Chinese companies sold a record amount of notes in the U.S. currency this summer as central bank support and signs of an economic rebound boosted investor demand. Borrowers from that nation led about $23 billion of debt sales by Asian issuers in August, more than double the year-earlier period, as companies took advantage of cheaper borrowing costs to boost cash buffers,” the article added.

CBON Chart

CBON data by YCharts

In the meantime, here are a pair of China-focused bond exchange-traded funds (ETFs) fixed income investors can consider:

  • VanEck Vectors ChinaAMC China Bond ETF (CBON): seeks to replicate as closely as possible the price and yield performance of the ChinaBond China High-Quality Bond Index. The index is comprised of fixed-rate, Renminbi (“RMB”)-denominated bonds issued in the People’s Republic of China (“China” or the “PRC”) by Chinese credit, governmental and quasi-governmental (e.g., policy banks) issuers (“RMB Bonds”).
  • KraneShares CCBS China Corporate High Yield Bond USD Index ETF (KCCB): seeks to provide investment results that track the price and yield performance of a specific fixed income securities index. The fund’s current index is the Solactive USD China Corporate High Yield Bond Index, which seeks to track the performance of outstanding high yield debt securities denominated in U.S. dollars issued by Chinese companies.

Something High (Yield), Something Low (Risk)

Investor interest in bond ETFs reached a fever pitch during the pandemic as volatility in equities spurred demand for safe haven assets. However, low rates have high yield bond seekers looking for ways to earn a higher-than-average return on debt, which they may find in the VanEck Vectors Fallen Angel High Yield Bond ETF (NYSEArca: ANGL).

ANGL seeks to replicate as closely as possible the price and yield performance of the ICE BofAML US Fallen Angel High Yield Index. The index is comprised of below investment grade corporate bonds denominated in U.S. dollars that were rated investment grade at the time of issuance.

Other options include lower-risk investment-grade debt. Investment-grade corporate bond-focused fixed-income ETF options include the iShares Intermediate Credit Bond ETF (NASDAQ: CIU), iShares iBoxx $ Invmt Grade Corp Bd ETF (NYSEArca: LQD) , and Vanguard Interm-Term Corp Bd ETF (NASDAQ: VCIT).

For more market trends, visit ETF Trends.