NATIONAL Bank of Canada (NBC) has issued a 3.5 billion yuan (US$517.7 million) panda bond, the first North American financial institution to do so, after China approved its 5 billion yuan bond program in September.

    Market participants say the yuan bond is unlikely to trigger a flurry of issuers to the market, however, unless borrowers require funding in the Chinese currency as the dollar, euro and yen are the currencies of choice for international companies.

    Panda bonds, or yuan-denominated bonds sold by foreigners on the mainland, were first issued in 2005 but Canadian issuers have had little need for yuan funding until now.

    “One of the real things is just nexus. Canadian banks have historically not been as big in the China sphere — panda bonds give you an onshore hedge, so it is really whether you need the yuan,” said Keith Pogson, a Hong Kong-based partner with EY.

    The Canadian bank said in a statement issued late Thursday, the three-year bond was sold at a coupon of 3.05 percent via China Merchants Securities, Standard Chartered Bank (China) Ltd., Agricultural Bank of China, Industrial and Commercial Bank of China and Bank of China.

    That compares with the 1.5 percent the lender paid for a three-year bond it sold in a US$100 million issue in August.

    NBC, Canada’s sixth-largest lender, has a AAA rating from China Chengxin International Credit Rating. International rating agency Fitch has rated the lender A-plus.

    “Panda bonds represent a new diversified funding source and will help us in supporting Canadian companies doing business in China and bilateral investment flows,” said Denis Girouard, executive vice-president at NBC.

    (SD-Agencies)