Deutsche Bank Launches Tradable CNH Bond Index

Written by Donald A. Elizondo    Wednesday, 21 December 2011

German lender Deutsche Bank has launched the first tradable offshore renminbi bonds index this week. It hopes the product will spur greater secondary market trading in the new asset class. Deutsche Bank launched the first tradable CNH bonds index on Monday (July 18)) in hopes of tracking the performance of CNH or dim sum bonds, and providing liquidity for the fast-growing market. The CNH bonds index is to be tradable among institutional investors. The Deutsche Bank Offshore Renminbi Bond Index Tracker (DB ORBIT), tracks CNH bonds and certificates of deposit (CDs) with a minimum issuance size of Rmb1 billion (US$155 million), with at least 12 months to maturity. It will be calculated in renminbi and rebalanced on a monthly basis. The index is also available in US dollars or Hong Kong dollars which will include the appreciation of the renminbi. CNH bonds or dim sum bonds indices are not new. Hong Kong's renminbi clearing and settlement bank, Bank of China (Hong Kong), inaugurated the first performance benchmark for dim sum bonds in December. HSBC and Citi also jumped on the bandwagon in March and April, respectively. "Improving market access not only raises the profile of CNH bonds amongst investors globally but ultimately strengthens the market's role as a reliable source of renminbi financing by boosting secondary market liquidity," said Vishal Goenka, head of local currency credit trading, Asia at Deutsche Bank. As of July 2011, Deutsche's new index represented a total market capitalisation of Rmb72.33 billion, with an average bond duration of two-and-a-half years and an annualised index return (in US dollars) of 7.38%. The German bank expects the gross issuance of offshore renminbi bonds to exceed Rmb150 billion and total bonds outstanding to amount to Rmb250 billion by the end of this year. Secondary market liquidity in CNH bonds continues to grow rapidly, with monthly volumes rising from around Rmb200 million in January 2011 to Rmb3 billion as of July this year, according to Deutsche Bank estimates. At the same, levels of primary issuance have also jumped from Rmb35.68 billion in 2010 to Rmb85.32 billion as of July 15 2011, according to Bloomberg data.

Last Updated ( Wednesday, 21 December 2011 )