Hong Kong Raises $5.8 Billion in Its Largest-Ever Green Deal

Hong Kong sold the equivalent of $5.8 billion of green bonds denominated in three currencies Wednesday, as debt markets roared back to life amid a global rush of deals.

(Bloomberg) — Hong Kong sold the equivalent of $5.8 billion of green bonds denominated in three currencies Wednesday, as debt markets roared back to life amid a global rush of deals.

The city priced $3 billion of dollar bonds across four tenors, a 1.25 billion euro ($1.3 billion) two-tranche note and a 10 billion offshore yuan ($1.5 billion) portion, according to people familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.

Investors sent in more than $25 billion of bids for the dollar notes, said the people. That’s allowed the issuer to trim pricing on the bond, while it has also seen a strong reception to its new green notes in the other currencies. Final yields of 3% and 3.3% respectively were set on the 2- and 5-year offshore yuan bonds, according to a person familiar with the matter. That’s as much as 50 basis points below initial guidance.

Hong Kong sold some $3 billion of dollar- and euro-denominated green bonds in November 2021, and days later issued its first such note in yuan. The government also raised HK$20 billion ($2.56 billion) in May 2022 from its first green bond for retail investors, part of the city’s efforts to become a sustainable-finance hub.

The start of 2023 has seen issuers globally rush to sell debt as borrowers are look to taking advantage of falling bond yields the past couple months. The beginning of years is historically a busy period for new bond sales. For Asian issuers, the dollar’s late-2022 pullback has also proved opportune to sell bonds denominated in that currency.

Among the latest deal rush, Hong Kong’s Airport Authority also has begun marketing a multi-part debt deal that includes five-year green notes, as it prepares to jump-start operations with reduced travel restrictions.

The global bond market entered a rare bear market last year as central bankers led by the Federal Reserve sharply raised interest rates to fight climbing inflation. But the market recovered some to end 2022. Spreads last week on investment-grade dollar bonds in Asia outside Japan reached their narrowest level in three months.

–With assistance from Hannah Benjamin-Cook and Caleb Mutua.

(Updates with deal sizes and Hong Kong Airport’s offering)

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