In mid-May, the People's Republic of China, which had been absent from the primary Eurobond market since December 1998, launched two separate deals - a $1 billion 10-year and e550 million five-year - each of which was heavily oversubscribed. China achieved tight pricing on bonds it hopes will provide a new benchmark for other Chinese borrowers. Instead of offering the usual new issue premium, it priced new paper inside the spreads to Libor at which China's outstanding dollar bonds were trading against swaps.
The A3/BBB rated borrower was able to take advantage of strong demand in Asia and Europe for a modest-sized deal from a name with real scarcity value. Asian demand priced the bonds, generating $3.4 billion of the total $4.6 billion of demand for the dollar deal. But European investors, keen to gain diversification in investment grade sovereign credits away from European governments, also subscribed eagerly, submitting orders for $1.2