(Bloomberg) -- Luxury hotel operator Shangri-La Asia Ltd. is tapping the onshore Chinese bond market for the first time, as diverging interest rates have made yuan borrowings significantly cheaper than debt denominated in other major currencies. 

Shangri-La is marketing a 3-year, 1 billion yuan ($138 million) panda bond — notes sold by offshore issuers in China’s domestic interbank bond market — with book-building slated for June 3-4, according to a person familiar with the matter. Bank of China Ltd., China Merchants Securities Co., and Mizuho Bank (China) Ltd. are underwriting the deal, the person added. 

Panda bond sales are set to hit a record this year with 74 billion yuan notes sold as of May 30, the most for that period, according to Bloomberg-compiled data dating back to 2016. Sales have already exceeded two-thirds of last year’s total, data shows. The difference in interest rates between the US — higher for longer — and China is the main driver of the sales frenzy. Among the issuers, Deustche Bank AG is said to plan a second panda bond sale this year within less than two months. 

China’s improved capital rules, which allow borrowers to remit proceeds raised from panda bond sales overseas, are another incentive for companies to take advantage of cheaper onshore borrowing to pay back offshore debt. The proceeds from Shangri-La’s panda bonds will be used to repay subsidiaries’ offshore interest-bearing liabilities, according to the person familiar with the matter.

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