Resurrecting the panda bond

By Felix Salmon
June 8, 2009

Should the US issue panda bonds, as Guo Shuqing, the chairman of China Construction Bank would like to see? Much better, I think, to start with the World Bank and a few other habitual foreign-currency issuers before suggesting that the US break with all tradition and borrow in any foreign currency.

But yes, if the World Bank can start issuing in yuan, and if it can easily swap its obligations back into dollar Libor, as Guo suggests is possible, then that’s a great idea. A benchmark yuan yield curve would do wonders for increasing the transparency of Chinese capital markets.

(HT: Alea)

Comments
4 comments so far

Panda bonds are a stupid idea for the U.S. as long as the Chinese continue to manipulate their currency. That means Geithner will do it.

Posted by Mike G | Report as abusive

I don’t think that it’s wise to allow the bonds to be called “Panda” bonds. Nor would Koala bonds or Cuddly Little Furry Animals bonds be a good idea.

Since people keep saying that bondholders need to remember that their investments are risky, and they shouldn’t be surprised or unusually bothered about their bonds losing money, I suggest the following possible names:

Ponzi bonds, Haircut bonds, Tonsure bonds, Khokhol bonds, etc.

In other words, choose a name that makes the prospective bond buyer wary, and likely to go to the extremes of due diligence.

I got a perfect name for the Panda Bond.

Its called ” certainly safer than US or UK bond”.

Posted by WS | Report as abusive

Ask Iceland about the wisdom of borrowing in foreign currencies.

Posted by Benedict@Large | Report as abusive
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