China's 50-year bonds should attract life insurers, Shenyin says

Setting an appropriate yield will be harder than for the existing longest-maturity debt of 30 years because of the longer time frame, Zhang said. A Bloomberg News survey showed investors were divided in their yield forecasts. Estimates by traders and analysts at 24 finance companies ranged from 4.3 percent to 5 percent, with the median forecast at 4.5 percent.

Insurers would need at least a 4.4 percent yield to cover the cost of the policies they sell, Zhang said. Investments of Chinese life insurers have an average duration of about 15 years, he said.

The countries' biggest banks, also primary dealers required to bid at treasury debt auctions, will also purchase part of the debt, according to Zhang.

A “reasonable” yield would be 4.35 percent, assuming a yield spread of 15 basis points more than the 30-year bond, currently at 4.2 percent, according to Chen Jianheng, a bond analyst at China International Capital Corp., the nation's first Sino-foreign investment bank in Beijing.

“Insurers face increasing pressure to invest their growing premium revenue, as their debt purchases in the first 10 months were much less than the annual amount in the past five years,” Chen said.

Local insurers received 78 billion yuan of premiums in October, bringing their revenue in the first 10 months of the year to 936 billion yuan, the insurance watchdog said Nov. 20.

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