Temasek's Strategic Use of Offshore RMB Bonds to Diversify Funding and Attract Global Investors

In an era of shifting global capital flows and evolving currency dynamics, Temasek Holdings, Singapore's sovereign wealth fund, has emerged as a trailblazer in leveraging offshore renminbi (CNH) bonds to diversify its funding strategies and tap into Asia's burgeoning offshore RMB market. By issuing high-credit, sovereign-backed bonds in yuan, Temasek is not only strengthening its balance sheet but also positioning itself at the forefront of a market transformation driven by China's push for yuan internationalization.

A Credit-Driven Edge in Offshore Markets

Temasek's bond program is underpinned by its unparalleled credit profile. Rated Aaa by Moody's and AAA by S&P, Temasek's bonds are backed by its parent company, Temasek Holdings (Private) Limited, which operates independently of the Singapore government but benefits from its long-term financial stability. This triple-A status has allowed Temasek to issue bonds across multiple currencies, including offshore RMB, at historically favorable spreads. 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.

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. By issuing CNH bonds, Temasek taps into this liquidity while offering investors a diversified, low-risk asset class.

Structuring for Long-Term Success

In 2025, Temasek announced a multi-tranche offshore RMB bond issuance, with maturities of 5, 10, and 30 years. The bonds, to be managed by Credit Agricole, DBS Bank, HSBC, and Standard Chartered, are expected to be rated Aaa/AAA, mirroring the company's sovereign-level credit ratings. This structure caters to both short-term and long-term investor needs, a critical factor in attracting a broad base of institutional and accredited investors.

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.

Attracting Global Capital with Strategic Pricing

Temasek's offshore RMB 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%. 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.

A Win-Win for Investors and Issuers

Temasek's offshore RMB strategy is a masterclass in leveraging credit ratings to access untapped liquidity. For investors, the bonds provide:
1. Diversification: Exposure to a non-dollar currency with a growing role in global trade.
2. Liquidity: Access to a market with deep institutional demand, particularly in Asia.
3. Yield: Competitive returns compared to other AAA-rated sovereign-backed bonds.

For Temasek, the benefits are equally compelling. By diversifying its funding sources, the company reduces reliance on traditional dollar and euro markets, mitigating risks from interest rate hikes in developed economies. Additionally, the offshore RMB market's growth—fueled by China's policy support—ensures a steady pool of capital for future issuances.

Investment Advice for the Offshore RMB Era

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 (e.g., U.S. Treasuries) face pressure from inflation and geopolitical uncertainty.

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.

Conclusion

Temasek's strategic use of offshore RMB 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.