(Yicai) Feb. 19 -- Chinese commercial banks have issued significantly fewer perpetual and second-tier capital bonds since the start of this year compared with a year ago due to larger lenders having relatively sufficient capital, with room still available for a further drop in policy interest rates.

Guilin Bank has issued the only perpetual bond this year, issuing one worth CNY3 billion (USD411.9 million) last month, while Postal Savings Bank of China plans to issue a CNY20 billion (USD2.7 billion) perpetual bond today, data provider Choice said today. No tier-2 capital bonds have been issued.

In comparison, some CNY190 billion (USD26.1 billion) of perpetual bonds and second-tier capital bonds, which are important tools for commercial banks to supplement capital to meet regulatory requirements, were issued in the same period last year.

Part of the reason for the sharp decline in the issuance of the two bond types is that large banks have relatively sufficient capital and do not need to supplement it in the short term, said Yang Yewei, chief fixed income analyst at a research institute under Guosheng Securities.

Some banks not in urgent need of capital have chosen to postpone the issuance of perpetual and second-tier capital bonds as they estimate policy interest rates will fall further this year, an industry insider told Yicai. 

However, since the amount of debt of lenders maturing this year is quite large, the drop in the issuance of the two bond types for the whole year will likely be limited, the person noted.

State-owned banks will not play a leading role in the issuance of perpetual and second-tier capital bonds this year as they did last year because their capital and tier-1 capital ratios are high, according to Ming Ming, chief economist of CITIC Securities. This will likely turn joint-stock and leading urban commercial lenders with a lower capital ratio into major issuers of such bonds, Ming added.

Most institutional investors are still bullish on investing in perpetual and tier-2 capital bonds, Sun Binbin, chief fixed-income analyst at TF Securities, pointed out. These bonds have good liquidity and no risk of redemption failure, making them one of the important investment targets in credit bond trading, Sun added.

Editors: Tang Shihua, Martin Kadiev