Indonesia has completed its first-ever issuance of panda bonds, raising approximately $1.03 billion (7 billion yuan) in what marks the country's entry into China's domestic debt market. The offering drew strong demand from investors, according to the report published by Economic Times Markets.

The issuance was split across two tranches. The three-year notes were priced at a yield of 1.9%, while the five-year notes carried a yield of 2.19%. Bond settlement is scheduled for July 30. The pricing underscores the cost advantage that China's onshore market currently offers investment-grade sovereign borrowers, with yields materially below those typical in U.S. dollar-denominated emerging-market debt.

Panda bonds are yuan-denominated debt instruments issued by non-Chinese entities in China's onshore bond market. They provide foreign governments and corporations with access to Chinese capital and allow issuers to diversify their funding sources beyond traditional dollar- and euro-denominated markets. The Asian Infrastructure Investment Bank and multilateral issuers such as the International Finance Corporation have previously issued panda bonds, helping establish the market's credibility among institutional investors.

Indonesia's successful debut adds to the growing roster of sovereign issuers that have tapped the panda bond market in recent years, reflecting broader efforts by emerging-market governments to broaden their investor base and secure cost-effective financing. The Philippines, Poland, and Portugal are among other sovereigns that have issued panda bonds. For Indonesia, the move complements its established presence in the samurai bond market in Japan and its regular global dollar bond issuance as part of a multi-currency funding strategy.

Source: Economic Times Markets