Global funds are buying China’s best-performing bonds at a record pace as benchmark yields stand out in a world of cheap money
- Foreigners added 50 billion yuan of the nation’s sovereign debt in July, according to data provided by ChinaBond
- Global investors boosted their holdings of China’s local government bonds by 1.2 billion yuan last month, or about 11 per cent of bonds outstanding
China’s benchmark 10-year yield fell last month by the most since February 2020. The yields has declined 31 basis points this year, more than any other major bond markets tracked by Bloomberg. At 2.83 per cent, the yield is still more than twice higher than US Treasuries’ 1.13 per cent.
“The wider rate differential between China and US bonds and easing monetary expectations drove offshore investors to buy more Chinese government bonds in July,” said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group.
Global investors boosted their holdings of China’s local government bonds by 1.2 billion yuan last month, the most since Bloomberg started compiling the data in 2019. As of July, they accounted for about 11 per cent of China’s government bonds outstanding.
Foreign investors are “still relatively small players, but certainly a growing factor” in influencing China’s bond market, said Sacha Tihanyi, head of emerging markets strategy at TD Securities.
The ChinaBond data cover most the interbank market, where most government and policy bank notes are traded. More figures is likely to be released by the Shanghai Clearing House that will cover some credit bonds in the interbank and exchange markets.