Temasek launches multi tranche offshore CNY Temasek bonds

Temasek launches multi tranche offshore CNY Temasek bonds

Singapore-based sovereign wealth fund Temasek Holdings has announced a significant expansion of its offshore Chinese yuan (CNY) bond program. The move, which comes amid a surge in global interest in the CNY, includes the issuance of five-year, 10-year, and 30-year bonds, marking a strategic diversification of funding sources for the fund.

The new issuance, announced on July 22, 2025, will be managed by Credit Agricole CIB, DBS, HSBC, and Standard Chartered as joint lead managers and joint book runners [2]. The bonds are unconditionally and irrevocably guaranteed by Temasek and are expected to be rated "Aaa" by Moody's and "AAA" by Standard & Poor's, reflecting the fund's strong credit profile.

Temasek's offshore CNY bonds are part of a broader strategy to diversify its funding sources and tap into Asia's growing offshore RMB market. The fund's strong credit ratings, rated Aaa by Moody's and AAA by S&P, have allowed it to issue bonds across multiple currencies at historically favorable spreads [1]. For instance, in 2024, Temasek issued a 10-year CNH 1.0 billion bond at a 2.75% coupon and a 30-year CNH 1.7 billion bond at 3.10%, reflecting the market's confidence in its creditworthiness [1].

The offshore RMB market, centered in Hong Kong, has seen a surge in activity in 2025, driven by China's efforts to expand the yuan's global footprint. Temasek's entry into this market aligns with broader trends: Chinese government agencies and state-owned enterprises have increased offshore RMB borrowings by 32% year-on-year in 2024, capitalizing on lower yuan interest rates compared to the U.S. dollar [1]. By issuing CNH bonds, Temasek taps into this liquidity while offering investors a diversified, low-risk asset class.

The 30-year tranche, in particular, is noteworthy. While long-dated bonds in offshore RMB markets are still nascent, Temasek's issuance could set a precedent for other high-quality issuers. By locking in low-cost financing for decades, Temasek reinforces its long-term investment horizon, which focuses on sustainable returns across global markets [1].

Temasek's offshore CNY bonds are priced to compete in a market where demand for yuan-denominated assets is surging. The Chinese Ministry of Finance's 2025 CNH 12.5 billion bond issuance, for example, was oversubscribed by 1.86 times, with coupons ranging from 1.75% to 2.37% [1]. Temasek's offerings, while slightly higher in yield, provide a risk-adjusted return that appeals to investors seeking diversification away from dollar and euro-based assets.

For global investors, these bonds offer a unique opportunity to hedge against currency volatility while accessing a currency that is increasingly integrated into global portfolios. The guarantee by Temasek Holdings, coupled with its triple-A ratings, reduces counterparty risk, making these instruments a safe haven in an uncertain macroeconomic environment [1].

Temasek's offshore RMB strategy is a masterclass in leveraging credit ratings to access untapped liquidity. For investors, the bonds provide diversification, liquidity, and competitive yields. For Temasek, the benefits include reducing reliance on traditional dollar and euro markets, mitigating risks from interest rate hikes in developed economies, and ensuring a steady pool of capital for future issuances [1].

As the offshore RMB market matures, investors should consider allocating a portion of their fixed-income portfolios to high-quality, sovereign-backed CNH bonds like Temasek's. These instruments offer a rare combination of yield, liquidity, and credit safety, particularly in a world where traditional benchmarks face pressure from inflation and geopolitical uncertainty [1].

However, investors must remain mindful of currency and regulatory risks. While the yuan's stability is bolstered by China's economic scale, fluctuations in its exchange rate against the dollar or euro could impact returns. A hedged approach, or a focus on long-term investors with a tolerance for currency volatility, is advisable [1].

Temasek's strategic use of offshore CNY bonds exemplifies how a strong credit profile can unlock new markets and drive innovation in capital structures. By tapping into Asia's growing offshore RMB ecosystem, the company not only diversifies its funding but also creates value for global investors seeking alternative sources of yield and diversification. As the yuan's role in global finance continues to expand, Temasek's CNH bonds are poised to become a cornerstone of institutional portfolios—and a testament to the power of sovereign-backed credit in an evolving world [1].

References:
[1] https://www.ainvest.com/news/temasek-strategic-offshore-rmb-bonds-diversify-funding-attract-global-investors-2507/
[2] https://www.businesstimes.com.sg/companies-markets/temasek-proposes-5-year-10-year-and-30-year-tranches-offshore-chinese-yuan-bonds