China's Perpetual Bonds

In the textbook, we mentioned several perpetual bonds issues. In January, The People's Bank of China joined the fold when it issued $5.9 billion of perpetual bonds with a yield of 4.5 percent. Other Chinese commercial banks appear to be ready to issue perpetual bonds as well. The slowing economy and rising defaults are forcing Chinese banks to recapitalize balance sheets. The Chinese government is also easing policies, which will allow primary dealers to exchange the perpetual bonds for central bank bills. This will increase the liquidity of the perpetual bonds.