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RMB/Yuan coverage expanding and Chinese cash management improving

The RMB/Yuan continues to expand its presence and coverage, and cash management in China is improving all the time as the following developments show.

Swiss & Chinese enter into currency swap agreement

Switzerland is the latest of a series of countries to set up swap lines with China, which is keen to promote the international use of the yuan. The Swiss National Bank and the People's Bank of China reached a currency swap agreement on Monday, allowing the two central banks to buy and sell their currencies up to a limit of 150 billion renminbi, or 21 billion Swiss francs ($23.4 billion).

The deal will also allow the Swiss central bank to invest some of its huge accumulation of foreign exchange reserves in the Chinese bond market, the SNB said in a statement Monday.

The SNB said the agreement will further strengthen collaboration between it and its Chinese counterpart and is a "key requisite for the development of a renminbi market in Switzerland." It could also facilitate trade and investment between the two countries, the PBOC said.

BAML launches new indexes tracking USD bonds by Chinese issuers

Bank of America Merrill Lynch has recently launched two new sub-indexes tracking US dollar denominated-bonds issued by Chinese issuers in the US domestic and eurobond markets, the first such indexes in the market.

The two new indexes has been developed from other broader existing indexes. They are The BofA Merrill Lynch Asian Dollar Investment Grade Corporate China Issuers Index(ACCG) and The BofA Merrill Lynch Asian Dollar High Yield Corporate China Issuers Index (ACYC).

ACCG includes 140 issuers with rating of AAA, AA, A and BBB (based on an average of Moody's, S&P and Fitch), while the ACYC has 102 issuers with ratings of AAA, BB, B and CCC. As of July 17, the total return increased 7.7% in the past 12 months and 6.4% year-to-date for ACCG, while it was up 13.5% in the past 12 months and 5.2% YTD for ACYC.

VW Financial Services completes first ABS deal

Volkswagen Financial Services has securitized some of their Chinese automobile credits. The 800 million RMB securitization transaction Driver China One is part of the asset-backed securitization (ABS) pilot programme that grants the wholly foreign-owned auto finance companies access to the local ABS market for the first time under the supervision of the China Banking Regulatory Commission and the People's Bank of China. The latest deal follows a total of 3.2 billion renminbi issuances by three other foreign auto financing companies.

Volkswagen Financial Services' 699 million renminbi Class A notes were placed with a fixed interest rate of 4.80% and the 44 million renminbi Class B notes with a fixed interest rate of 8.08%. It is believed that both order books were oversubscribed at placement pricing levels.

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