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Bonds
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Global investors pile into China’s sovereign bonds in search of returns from the strengthening yuan

  • Overseas investors bought 87.9 billion yuan of China’s soveriegn bonds last month, more than three times their October purchases, according ChinaBond’s data
  • Global holdings of Chinese sovereign bonds surged to a record-high of 2.39 trillion yuan

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Bloomberg
Foreign investors boosted their Chinese government bond holdings last month by the most since January as the yuan’s gains raised the attractiveness if the nation’s debt.
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Overseas investors bought 87.9 billion yuan (US$13.8 billion) of the bonds last month, more than three times their October purchases, according to data from ChinaBond. Their overall holdings surged to a record-high of 2.39 trillion yuan.

“The yuan’s resilience and low volatility raised the appeal of Chinese onshore bonds,” said Xing Zhaopeng, a senior China strategist at Australia & New Zealand Banking Group. Inflows related to the central bank’s reserve diversification remain strong, he added.

Onshore yuan gained 0.6 yuan in November and is poised to become Asia’s best-performing currency this year with 2.9 per cent gains on the back of a strong trade surplus and robust inflows. A strong currency along with the People’s Bank of China’s accommodative stance have boosted the nation’s sovereign bonds, especially as other major central banks move toward tightening policies.

The share of China’s sovereign bonds held by overseas investors rose to 10.9 per cent in November from 10.7 per cent last month, according to Bloomberg calculation. That’s after the bonds were included in FTSE Russell’s flagship index in October, which analysts expect to drive around US$130 billion of inflows across three years.

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