(Bloomberg) — China just borrowed dollars on global credit markets at essentially the same price as the country printing them, and traders immediately pushed bond yields even lower.

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The Asian nation raised $2 billion through three- and five-year bonds that yield just one and three basis points, respectively, over Treasuries of similar maturity. Then, once trading began Thursday, spreads tightened to around 24 and 25 basis points for Treasuries, traders said.

This adds to signs of strong demand that have been evident throughout the debt sale process. Bids for the $2 billion deal topped $40 billion, or 20 times the amount offered, according to a person familiar with the matter.

Traders said some of the strength came from demand from Chinese investors, who sought higher returns globally as local rates fell. These investors can also benefit from tax exemptions on the country’s sovereign debt. Their enthusiasm has already contributed to yields on some previously issued Chinese dollar bonds being lower than those on Treasuries for most of the past year, a rarity because U.S. securities have historically been considered the hottest investments. safer.

“The lack of supply of dollar bonds and accommodative financing conditions in the domestic market have led to a strong supply of dollar bonds from local Chinese investors,” said Xue Zhou, senior economist for the China at Mizuho Securities Asia Ltd.

China’s dollar note maturing in November 2027 had a so-called negative spread against U.S. Treasuries for most of the past year, and the yield on this debt security was around 18 basis points below the equivalent U.S. government bond, according to data compiled by Bloomberg.

While the newly issued Chinese bonds were available to investors around the world, officials said last week that they would be sold in Saudi Arabia, an unusual location given that London, New York and Hong Kong are normally chosen for such transactions. But this choice comes after recent efforts to strengthen economic ties. Officials from the two countries met earlier this year to discuss cooperation, and the warming of relations can be seen in moves such as the doubling of investment in Saudi Arabia by top steel producer China.

“This is consistent with the growing ties between the two countries,” said Ting Meng, senior Asia credit strategist at Australia & New Zealand Banking Group. “The bond is in the same format as the previous ones, but there could be more investors in the Middle East.”

The bonds will be listed on Nasdaq Dubai and the Hong Kong Stock Exchange.

China sold 2 billion euros ($2.1 billion) of notes in Paris in September, its first sale of euro-denominated bonds in three years. Last week, the Finance Ministry announced a $1.4 trillion rescue package for indebted local governments, but failed to provide more stimulus to boost domestic demand.

Bank of China, Bank of Communications, Agricultural Bank of China, BofA Securities, China Construction Bank, China International Capital Corporation, Citigroup, Crédit Agricole CIB, Deutsche Bank, First Abu Dhabi Bank, Goldman Sachs (Asia) LLC, HSBC, ICBC, JP Morgan, Mizuho and Standard Chartered Bank organized the sale.

–With help from Qingqi She, Helene Durand, Paul Cohen, Caleb Mutua, Jing Zhao, Shulun Huang and Paul Dobson.

(Updated with more information throughout)

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