S. Korea floats yuan-denominated FX stabilization bonds in China

South Korea finance ministry said Tuesday that it has successfully issued yuan-denominated foreign exchange stabilization bonds in the world's No. 2 market.

The move comes after the People's Bank of China (PBOC) approved the issuing of upwards to 3 billion yuan (US$463 million) worth of bonds on Dec. 8.

The sale marks the first time ever that a foreign government has floated yuan-based bonds in China.

"The sale took place at 5:30 p.m. Korea time with the bonds that mature in three years having an interest rate of 3 percent,"

the ministry said. "Considerable interest was shown by Chinese investors."

It said although there can be no direct comparison, three year bonds recently issued by large financial institutions like HSBC carried interest rates of 3.5 percent.

The sale, meanwhile, is expected to help South Korea increase its holding of the Chinese currency.

Market watchers said that issuing bonds in China will make it much easier for local companies to get their hands on the currency, which can fuel commerce. In the past, local companies got yuan indirectly through Hong Kong and Taiwan.

In addition, they said the latest move can make it possible for local companies to issue their own yuan-based corporate bonds in China down the road. (Yonhap)