China’s recent $2 billion sale of U.S. dollar-denominated bonds, its first in three years, has drawn scrutiny for what one analyst said could be a warning to President-elect Donald Trump, who has threatened tariff hikes.
The bonds were issued in two tranches: $1.25 billion maturing in 2027 with a 4.284 percent annual interest rate; and $750 million maturing in 2029 with a 4.34 percent rate. These rates were just 1 to 3 basis points (0.01 percent to 0.03 percent) higher than U.S. Treasurys, the safest and most trusted government debt. By contrast, even AAA-rated countries like Switzerland typically pay 10 to 20 basis points above U.S. Treasury rates.
Investor demand for the bonds was extraordinary, with the issuance oversubscribed nearly 20 times, drawing $40 billion in bids for just $2 billion in supply. This bid-to-cover ratio far exceeds the 2x to 3x ratios typical of U.S. Treasury auctions, according to Bureau of Public Debt data….
