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CDB’s First Financial Bond under Bond Connect to Be Sold

ICBC will sell the seventh China Development Bank (CDB) financial bond in 2017 to retail and non-financial institutional customers via over-the-counter (OTC) distribution channel from July 5 to 10 (except for non-working days). The bond is CDB’s first financial bond under Bond Connect, issued to domestic and foreign investors. It is a one-year fixed-rate bond with a code of 170207 and a coupon rate of 3.53%. Customers can subscribe the bond via ICBC’s e-banking channels and outlets. The e-banking channels are available around the clock during the issuance period.

Bond Connect refers to a mechanism arrangement linking infrastructure institutions of mainland China and Hong Kong bond markets, by which domestic and foreign investors can trade negotiable bonds on both markets. Bond Connect is initially Northbound, where overseas investors in Hong Kong and other countries and territories (“overseas investors”) can invest in Chinese mainland interbank bond market via mechanism arrangement of mutual access in trading, custody and settlement between infrastructure institutions of Hong Kong and mainland China. An official with ICBC suggests that the Bank, as the largest investor, market maker and underwriter in the Chinese interbank bond market, is always committed to promoting the opening-up of the bond market. For the financial bond under “Bond Connect”, which CDB has issued to domestic and foreign investors for the first time, ICBC and ICBC (Asia) serve as a member of underwriting group and a cross-border coordinator respectively. ICBC has guided overseas investors to participate in issuance and subscription of this bond, while selling the bond via China’s OTC market. Individual and non-financial institutional investors in China can subscribe the bond via ICBC’s outlets and e-banking channels.

OTC CDB bond features high credit rating and security, low trading threshold and fixed return, with the trading threshold and the minimum incremental unit both at 100 yuan in face value, which can meet investment needs of the public for safe and transparent bond products with medium returns. Customers can buy or sell the bond at any time during trading hours via the Bank’s e-banking channels and outlets, with transaction funds settled on a real-time basis. It effectively meets customers’ demand for liquidity. At the same time, customers can also take favorable opportunities of price volatility to gain bid-ask spread.

Since OTC CDB Bonds were issued via outlets of commercial banks in May 2014, ICBC has regularly issued 18 OTC CDB Bonds. With increasingly important role of commercial banks in bond distribution in the OTC bond market, the normalized issue of OTB CDB bonds has strong implications in broadening financing channels of issuers, lowering funding costs and building a multi-layered bond market system.