China has allowed individual investors to purchase a part of the special central government bonds for novel coronavirus control starting from Friday, with experts expecting the diversified investment structure to promote the sustainable development of the world’s second-largest bond market.

According to a notice from the Ministry of Finance, individual investors can trade the special treasuries through accounts opened in exchanges and six commercial banks including Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of Beijing.

Individual investors cannot redeem the treasuries before maturity, but they can trade in the secondary market with floating prices. Investors should, however, be aware of the price fluctuations, the ministry said.

The COVID-19 special treasuries’ coupon rates were determined at an auction on Thursday. They were set at 2.41 percent for 50 billion yuan ($7.06 billion) with a maturity of five years, and at 2.71 percent, for the seven-year bonds, according to the Ministry of Finance.

With relatively lower risk, high quality and stable returns, the special treasury is still a good choice for individual investors, said Wen Bin, chief researcher of China Minsheng Bank. “The treasuries have high liquidity in the secondary market.”

The first two batches of special treasuries totaling 100 billion yuan will be listed and traded on June 23, while the third batch of 10-year bonds will be traded on June 30, according to statements on the ministry’s website. Besides individuals, institutional investors, including foreign investors, can purchase the bonds in the interbank market.

“International investors may increase their China bond holdings in a post-virus scenario, if they decide to diversify away from dollar assets,” said Stephen Chiu, Asia FX and Rates Strategist with Bloomberg Intelligence. Global investors account for just 2 percent of China’s $15 trillion bond market as of today, far lower than their presence in the US and Japan, according to Chiu.

In May, international investors’ holding of onshore bonds and the net increase hit a record as the returns on Chinese bonds were much higher than the major developed countries amid the COVID-19 pandemic, according to Hu Yi, head of Asia Credit Research at Invesco.

The current interest rate spread of Chinese 10-year treasuries and the US treasuries has expanded to the largest in nearly a decade.”Including Chinese government bonds in the investment profiles will help spread risks. As China has better controlled the virus, it has boosted international investors’ confidence in the domestic market,” said Hu.

China will adopt a more proactive fiscal policy this year, setting its fiscal deficit at above 3.6 percent of GDP and issuing 1 trillion yuan of special treasuries for COVID-19 control this year to release more funds for companies and individuals.

Earlier this week, China announced the public offering of the first three batches of special government bonds, totaling 170 billion yuan. All the special treasuries are likely to be issued by the end of July.

The ministry reported on Thursday that last month, the nation’s general public budgetary income decreased by 10 percent from a year earlier, with a decline in the tax income by 7.2 percent.

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