Inside Bank of China issues first ever SOFR-linked bonds in Asia

Author: Karry Lai | Published: 6 Nov 2019

Bank of China has issued the first secured overnight financing rate (SOFR)-based bonds in Asia. The $350 million US-dollar SOFR floating rate note (FRN) issued by Bank of China’s Macau SAR branch is the first public bond out of China and Asia that is linked to the US’ Libor replacement.

The transaction involved three tranches of bonds denominated in CNY, USD and euro with tenors of two to three years totalling $960 million.

SOFR is a new lending reference rate established by the Federal Reserve Bank of New York. It sets the benchmark interest rate of the cost of borrowing cash overnight as collateralised by US Treasury Securities. SOFR will be the direct replacement to USD London interbank offered rate (Libor), which is set to be formally discontinued at the end of 2021. Although market...