Allen & Overy said today the RMB3 billion debut bond issue by the UK government represents a significant step in the internationalisation of the Chinese currency and underlines the UK’s global ambition to become a renminbi hub.

The 2.70% three year bonds were almost twice oversubscribed, with strong demand enabling an issue size of RMB3bn, making it the largest ever RMB issue by a non-Chinese issuer. Allocations were made to a wide range of investors including central banks, bank treasuries and fund managers across the world.

The funds will be used to diversify the UK’s reserves which until this point have only included financial assets denominated in Canadian and US dollars, euros and yen. The proceeds are expected to be reinvested in the small but rapidly-growing renminbi offshore market.

Capital markets partner Geoff Fuller commented: “The renminbi is quickly becoming a vital part of the currency mix, and the UK has shown itself to be ahead of the curve once again by being the first Western sovereign to raise debt finance in this way. We expect this will prompt market participants from both the private and public sectors to follow.”

Allen & Overy advised Bank of China, HSBC and Standard Chartered as joint arrangers on the transaction. The team was led by London-based capital markets partners Geoff Fuller and Matthew Hartley with support from senior associate Peter Crossan and associate Kerry Fitzgerald. Additional advice was provided by capital markets partner Walter Son in Hong Kong and banking partner Jane Jiang in Beijing.