CHINA’S central bank conducted its fourth sale of offshore bills in Hong Kong yesterday in new tenors, in a move to develop the offshore yuan curve and curb speculative pressure on the currency.

The People’s Bank of China (PBOC) sold 30 billion yuan (US$4.35 billion) in bills in Hong Kong, it said. A 20 billion yuan one-month tranche was priced at a coupon of 2.80 percent, while a six-month tranche worth 10 billion yuan came in with a coupon of 2.82 percent.

It was the central bank’s first issuance of one-month and six-month bills in Hong Kong. Previous sales featured only one-year and three-month tenors.

The central bank said bids exceeded 85 billion yuan. Investors included commercial banks, funds, investment banks, central banks and international financial organizations. The previous sale in May attracted more than 100 billion yuan in bids for 20 billion yuan in offshore bills.

The central bank said the sale satisfied market demand, helping form a better offshore yuan yield curve and promoting the yuan’s internationalization.

While the 85 billion yuan in bids accounted for approximately 14 percent of Hong Kong’s offshore yuan pool, liquidity conditions in Hong Kong were loose yesterday, with the overnight CNH Hong Kong Interbank Offered Rate (HIBOR) falling to 1.77967 percent, its lowest level since March 14.

Hao Zhou, an analyst at Commerzbank in Singapore, said the bill sale was a “gesture to warn yuan shorters.”

“The PBOC is able to increase the cost of shorting CNH, but the issuance price is quite normal compared with other bills,” he said. (SD-Agencies)