On February 20, China's first cum-right municipal bonds were successfully issued on SZSE by Guangdong Provincial Government. This is an important innovation of Guangdong Province in the implementation of the Regulations on the Administration of Land-reserve Special Bonds for Local Governments (Trial) and a major breakthrough for SZSE to serve local governments' innovative special bond varieties.
This time, Guangdong Province issued CNY41.6 billion of 11 municipal bonds by tender, involving duration cum-right design and long-term product innovations such as 15-year and 20-year term bonds. Among these bonds, there are CNY2 billion of 2019 Land Reserve Special Bonds of Guangdong Provincial Government (2nd-tranche) with a term of 3+2 years (hereinafter referred to as the cum-right bonds). At the end of the third year, the issuer will exercise full redemption option of the cum-right bonds. The bond interest rate is 3.14% and the subscription multiple is 33.5, indicating energized subscription by market investors. Thanks to structured innovation, the cum-right bonds are with rationally designed bond term structures which are conducive to enriching municipal bond varieties and enhancing the flexibility of repaying the bond principal on one hand. On the other hand, it helps the issuer to actively strengthen debt management and avoid maturity mismatch and idle funds so as to save interest costs. The funds raised by the bonds will be used for the land purchasing and reserve projects in the western part of Zhuhai Municipality, involving three land reserve projects in Doumen District, Jinwan District and an area which is directly under the Zhuhai municipal government respectively. These projects will actively contribute to the economic development of the Guangdong-Hong Kong-Macao Greater Bay Area.
An SZSE officer said that SZSE has always been steadfast in deepening reform and supporting innovation. SZSE will actively serve the Guangdong Provincial Government and continue to promote the innovative development of municipal bond issuance under the premise of strictly implementing the relevant provisions of the Budget Law, strengthening the management of local government debt limits and effectively regulating governmental bond financing. Next, SZSE will continue to implement the work arrangements of the Ministry of Finance and the CSRC, constantly improve the issuance service level, give full play to the advantages of the SZSE bond market, serve local governments to improve special bond management and promote municipal bond innovation, and fully support the market-based development of municipal bonds.
