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Poland to issue Europe’s first sovereign panda bond

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The Polish government will issue a three billion yuan ($455.55 million) three-year bond in China’s onshore market, the state-owned China News Service reported, marking the first time a European nation has issued yuan-denominated debt in China.

The Polish deputy finance minister told Reuters in March that the nation was considering issuing a panda bond, but that the exact amount and timing had not yet been agreed.

News of the bond, which was reported on Tuesday evening, comes on the heels of a visit to Poland by Chinese President Xi Jinping earlier this week.

Bank of China, which China News Service news agency said was a lead underwriter, had no immediate comment when reached by phone.

A notice announcing a memorandum on the bond issuance with Poland posted on Tuesday on Bank of China’s website was not accessible on Wednesday.

Issuance of so-called panda bonds, yuan-denominated onshore Chinese debt issued by foreign entities, was first permitted in 2005 but the market has been slow to develop.

As of March 2016, the outstanding amount of panda bonds was only $2.57 billion, according to the ratings agency Fitch.

Most issuers in the past have been international financial institutions, but in the second half of 2015 Chinese regulators began drafting rules allowing issuance by a wider variety of entities including non-financial corporates.

In its March report, Fitch said that despite low yields “stringent regulatory requirements, local investors being largely unfamiliar with international names, and shallow secondary market liquidity” were likely to limit the growth of the panda bond market for the time being.

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