NSW Treasury samples fresh Dim Sum market

Bernard Kellerman
Following on closely from the signing of the Free Trade Agreement between Australia and China, the NSW Treasury Corporation has moved to become the first Australian government to announce a bond issue will be sold into the so-called Dim Sum market, which deals in bonds priced in RMB.

The issue will be of a minimum size of at least CNH1 billion with a tenor of one year and is issued as part of NSW treasury Corporation's EMTN program. As ANZ's economics commentators observed in a note to clients yesterday: "The appointment of a clearing bank implies that when NSWTC decides to convert CNH proceeds into AUD, it can do so and settle the transaction with the Sydney branch of Bank of China."

"This leaves open the possibility of the RMB brought into Sydney staying in the local market, thus creating the conditions necessary for Sydney to become an offshore RMB hub. This is quite important and necessary for facilitating RMB-settled flows in the future."

ANZ's China research team believes that, if 30 per cent of bilateral trade is to be settled in RMB by 2020, it would represent payment flows of US$48 billion or RMB300 billion per year.

For Australian dollar fixed income investors, the issuance in renminbi is not a dilution of the benchmark bond program, and thus has no effect on the issuance or liquidity of these bonds, according to ANZ's 'Rates Insight' bulletin, sent on 19 November.