Standard Chartered Becomes Frst Commercial Issuer Of SDR Bonds In China

Tyler Durden's picture

On August 31, in what was dubbed a "historic event", the World Bank became the first issuer of bonds denominated in SDR and settled in yuan when it sold 500 million SDR units worth of bonds in China. Then, overnight, in yet another historic event, Standard Chartered Bank (Hong Kong) said on Friday that it has obtained approval from the People’s Bank of China to be the first commercial issuer of bonds denominated in Special Drawing Rights (SDRs) in China’s interbank bond market.

According to Reuters the size of the issuance programme is 100 million SDRs – approximately 925 million yuan, or $139 million – and the bonds will be settled in yuan.

A successful offering would mark the first ever time a commercial issuer has issued securities have been issued in the synthetic reserve currency in 35 years.

“SDR bonds, to be settled in RMB, will help promote SDR financial instruments, provide a channel for investors to invest in foreign currency bonds in the onshore market, and offer more diversified bond products in the market,” said Standard Chartered Bank China’s head of financial markets Wesley Yang quoted by SCMP.

Saving money on underwriting costs, Standard Chartered Bank (China) will act as joint lead underwriter on the company's own offering and joint lead bookrunner to arrange roadshows in Beijing and Shanghai.

China has been promoting the International Monetary Fund's SDR as an alternative to the US dollar, and has made the alternative reserve currency a key focus of its push to internationalise the renminbi.

“The SDR bond is a step in offering a fixed income product that captures multi currency exposure for Chinese investors ... but at this stage I think it’s more symbolic than anything else,” said Brett McGonegal, chief executive of capital link international.

“The impact of the bond is very small as the size is tiny in comparison to US dollar denominated bonds and the secondary market for SDR bonds is non existent since this is the first of its kind issued in over 30 years.”

According to SCMP, the development of a secondary market for SDR bonds will be pivotal, due to the need for a mechanism to value the bond after it has been purchased from the underwriter, as well as in enabling greater institutional involvement.

“Until we see how the secondary market forms we will not be able to judge the success and value of the bond,” said McGonegal. "The dim sum market proved to the world that those bonds were only retail in nature and offered no real secondary market thus forcing purchasers to hold until maturity. This was a great trade when the yuan was appreciating but turned into a disaster when it started to fall."

And now that an alternative issuance currency is needed, the IMF's SDR will be happy to step in those shoes, or at least try, as it attempts to become, at first tentatively, to become a new global currency, one which - however - will need a lot of support from an establishment funded in the US currency to displace the greenback as the world's reserve currency, especially since it remains unclear how China feels about floating the Yuan and making it a truly international, and thus competitive, currency.

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38BWD22's picture



But the US$ ain't dying today, now at 98.04.


LawsofPhysics's picture

Yep, at this point if you can bet on anything, bet on the Fed defending the only thing that they really control...

The Federal Reserve Prommisory note.

froze25's picture

Do you think that the Feds controllers care about what currency it is that they control? They control the IMF too except the IMF's SDR isn't subject to Congress as the Federal Reserve note is. They will kill the dollar in order to have a world currency that isn't controlled (at least in theory) by elected people.

. . . _ _ _ . . .'s picture

"...the IMF's SDR isn't subject to Congress as the Federal Reserve note is. "

*touches nose with index finger*


Same with the strategy of moving the internet HQ out of USA. NSA can legally snoop every packet if it leaves the US. Now even US to US comms can be snooped without depending on five eyes.

JRobby's picture

Not Barclays? Blasphemy!

Raffie's picture

The Yellen fear screech will wear off some of the sheeple and order will be restored.


Bill of Rights's picture


Not sure if this is it

JRobby's picture

She and her broomstick down in flames on Halloween night! Villagers stone her smoldering remains!

Is that the movie we want to see?

Citxmech's picture

"Mom, Dad, don't touch it, it's evil!"

- Time Bandits

ForWhomTheTollBuilds's picture

Hadnt heard of this, but if Hillary drops an "N-word" in the forest and the MSM refuses to acknowlege it, does the "N-word" make a sound?

froze25's picture

It depends does the forest self identify as Cedar or Oak?

froze25's picture

I wouldn't call it racist, I would call it just another example of her being a ruthless evil witch. Trump 2016

LawsofPhysics's picture

Wow, the Chinese will really buy anything after all...

ForWhomTheTollBuilds's picture

A lot of people have been calling Rickards an idiot for thinking that a basket of fiat currencies would ever be accepted as an alternative to individual ones.  


Now we will find out who was right.

The_Dude's picture

Dim sum market? Man, those fuckers will eat anything! 

RaceToTheBottom's picture

A few more checkboxes completed for the great fiat reset...

ParkAveFlasher's picture

One might say that Standard Chartered has grabbed that pussy.

lew1024's picture

Quite a brilliant strategy for the US oligarchs, I think, as it is leverage over the entire Chinese financial structure, as well as a skim on Chinese finance.  The skim is obvious, they make $ on all of the hedging this will generate.

The control is also obvious, why would the US government rescue an insurer of Chinese bonds? No invester would do that, certainly not an insider. So the people investing will be Chinese trying to move $ out of China, or idiots when the markets just have to put the $Ts that will soon move out of the bubbles.

reader2010's picture

The International Capital has successfully put enslaving financial system for China via SDR.

PoasterToaster's picture
PoasterToaster (not verified) Oct 14, 2016 3:16 PM

Falling back on a new reserve currency is still falling back.  Things will accelerate; this isn't the reset they need.

SilverRaven's picture

First phase of the new Global currency folks.
Going full retard in 2018 in ATM near you!

GraveDancer's picture

So China is borrowing from itself to pay itself but using it's newly attained SDR status to do so via World Bank. Never mind how the Yuan's value falls as China enters the trap of constantly issuing in SDR and settling in Yuan. 500 million won't matter now but as success breeds success, it will soon be 250 billion and then 500 billion or a trillion. I guess monetising it's forex reserves no longer seems attractive if done directly. An issuer like World Bank makes them feel 'secure'

This is the most seductive way of hyper inflating and nobody gets off this kind of crack coccaine. It's Chinese people who will pay the price eventually. 

Yeah yeah.. it's long dated and sovereign backed and a sovereign is a perpetual entity and a wonderful state like China cannot fail etc etc.