The issue, which has ignited a buying euphoria, was priced yesterday and will officially be floated next Wednesday.

"Demand has been overwhelming,'' said Robert Rooney, executive director and head of the European debt syndicate for Morgan Stanley. His company is one of the managers of the issue.

Sovereign bonds are debts issued by a sovereign government in overseas markets. Reaction to such bonds reflect investors' feel for that country's political and economic prospects.

Yesterday's issue has been released as US$1 billion in 10-year US dollar bonds and US$550 million in five-year bonds denominated in the euro.

Rooney said the dollar bonds were 3.7 times oversubscribed.

China's Vice-Finance Minister Jin Liqun said he expected the dollar-bond issue to have a spread of 135 to 140 basic points over US treasury bonds.

The US treasury bond is used as international securities price gauge and the spread denotes the interest rate.

Rooney said strong demand tightened the spread of China's dollar-bonds to 133 basic points, which means China would pay less money than expected in repaying the debt.

The coupon rate of the US$550 million euro-bonds was set at 5.25 percent, which stayed unchanged from expected price.

Both Chinese officials and market players said China is not issuing the bonds just to raise money. Rather, the purpose is to set a benchmark for China's corporate borrowers.

The previous such bond issue occurred in December 1998.

The Chinese government is taking advantage of the current low interest rate level by issuing the bonds now.

The international rating agency Fitch assigned a rating of A- to the fresh issue, citing the country's strengthening position as a net external creditor.

"Clearly investors see China's credit rating improving,'' Rooney said.

(China Daily 05/18/2001)