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Moody's: Chinese local government bond issuance to break records in 2019

Bond issuance by Chinese local government financing vehicles, or LGFVs, is expected to break previous records in the onshore and offshore markets, led by higher infrastructure investment, Moody's said in a report.

Offshore issuance of LGFV bonds holds a record of $22 billion, while onshore issuance previously peaked at 2.6 trillion Chinese yuan, according to the report.

Offshore issuance continues to grow despite restrictions imposed in June, and is partly supported by refinancing needs and pending issuance. The report noted that investors appear to prefer low-rated LGFV bonds over similarly rated non-LGFV bonds onshore as yields on LGFV bonds are comparatively lower.

Meanwhile, bond maturities are also increasing significantly and may pose some refinancing risk as $21 billion of offshore bonds and 2.2 trillion yuan of onshore bonds are due through 2020, said Ivan Chung, associate managing director at Moody's Corporate Finance Group.

As of Aug. 27, US$1 was equivalent to 7.16 Chinese yuan.