(Yicai) July 24 -- The National Bank of Canada, the first North American lender to issue panda bonds, is slated to issue two-year bonds worth up to CNY5 billion (USD687.1 million) in China's interbank bond market on July 29, joining a rush to the low-yield debt market.

The funds will be used to support the financial institution's general business, the major commercial lender in Canada announced today, adding that the interest rate will be disclosed later.

Panda bonds are yuan-denominated debt instruments issued by foreign entities on China's mainland. Overseas institutions are increasingly borrowing in China as the scale of issuance is increasing this year after hitting a record high last year.

Montreal-based National Bank debuted its first panda bonds worth CNY3.5 billion in November 2016. Last October, it issued three-year notes worth CNY1 billion with a coupon rate of 3.2 percent, and last month, it added CNY3.5 billion of three-year bonds with a coupon rate of 2.34 percent.

As of July 15, the scale of new panda bonds this year has reached about CNY121 billion (USD16.6 billion), up about 30 percent from a year ago, while the market consists of CNY280.5 billion (USD38.5 billion) of existing notes, based on data from Citic Securities.

Since last month, National Bank and six other institutions, including Bayer and Deutsche Bank, have issued panda bonds worth CNY16 billion (USD2.2 billion) in total and the coupon rates are mostly above 2.2 percent, according to data disclosed by the Shanghai Clearing House.

The panda bond expansion this year is mainly caused by rate hikes abroad, low yields in the Chinese bond market, and gradual systemic improvements, said Zhang Jiqiang, a fixed-income analyst at Huatai Securities.

The brokerage predicted that fundraising costs would remain attractive to overseas issuers this year and that the scale of panda bonds could continue rising. Investors should pay attention to medium and high-graded as well as medium and long-term panda bonds against the backdrop of China's asset famine, it added.

Editor: Emmi Laine