Deutsche Bank approved to underwrite bonds in China's interbank bond market

Deutsche Bank announced on Thursday that it has obtained a license to underwrite debt financing instruments for both onshore and offshore issuers in China’s interbank bond market.

Approved by the National Association of Financial Market Institutional Investors (NAFMII), the German lender will be able to underwrite corporate bonds in the world’s third largest fixed income market.

The bank is already licensed in China as a market maker on the interbank bond market and the Bond Connect scheme, and as a bond settlement agent.

Werner Steinmueller, head of Deutsche Bank’s Asia Pacific business, said they were very pleased to be granted the license, which cements their status as one of only a select handful of full-service foreign banks in China.

As of the end of June 2018, China’s interbank bond market reached a combined size of over 78.7 trillion yuan (US$11.7 trillion), according to financial data service provider Wind Information Co Ltd. And the first half saw net new issuance volume of 4.1 trillion yuan, of which 10 percent went to foreign investors.

Deutsche Bank expects yuan bond investment flows to reach 4.6 trillion yuan to 5.3 trillion yuan over the next five years, including 700 billion yuan in 2018.

Panda bonds, or yuan-denominated bonds, issued by international issuers are becoming increasingly important for international corporate clients who are looking to tap the onshore market to fund their domestic business.

Last year, China published new cross-border financing rules which make it easier to use funds raised via Panda bonds for financing onshore operations, while also allowing proceeds to be remitted outside the country.