Postal Savings Bank of China Co. is planning what would be the country’s first sale of mortgage-backed securities since 2007 as the government accelerates development of the securitization market.
The lending arm of state-owned China Post Group Co. will issue 6.8 billion yuan ($1.1 billion) of the notes on July 22, according to a statement on the website of Chinabond, the nation’s biggest debt clearing house. The securitization is backed by residential mortgages, according to the statement.
Premier Li Keqiang is seeking to develop the credit market to shift financing to official channels as he takes steps to slow growth in shadow banking. The last MBS was sold by China Construction Bank Co. in 2007, Bloomberg-compiled data show.
“The reintroduction of MBS is a natural progress along with the government’s support of the securitization market,” said Li Ning, a bond analyst in Shanghai at Haitong Securities Co., the nation’s second-biggest brokerage. “The government will allow more sales of ABS or MBS products in the future.”
While China started allowing securitization sales in 2005, it halted the development in 2009 after the global financial crisis fueled concern over securitized products. The government resumed approving the issuances in 2012 to help facilitate the financial reform.
China Postal Savings, which is based in Beijing, will sell 6 billion yuan of a AAA rated tranche A securities, 477 million yuan of A- rated tranche B notes and 341 million yuan of subordinated securities, Chinabond said in the statement. The maturity date is December 31, 2039 and Citic Securities Co. is the lead underwriter.