Source:
https://scmp.com/economy/china-economy/article/3123905/china-debt-foreign-holdings-government-bonds-rise-above-2 China Economy
China debt: foreign holdings of government bonds rise above 2 trillion yuan in February amid global rout
- Total holdings of Chinese government bonds by investors outside mainland China stood at a record 2.06 trillion yuan (US$318 billion) at the end of February
- Foreign holdings of quasi-sovereign policy bank bonds also rose 3.1 per cent, to 986.97 billion yuan.
Chinese government bonds were not immune to selling that hit global bond markets in late February as rising expectations of economic growth and fears of a possible spike in inflation made investors retreat, but avoided the worst of the rout. Photo: AFP
Foreign investors held more than 2 trillion yuan (US$309 billion) worth of Chinese government bonds for the first time in February, data showed on Wednesday, even as premiums over US debt shrank as a bond sell-off dented global markets.
Total holdings of Chinese government bonds by investors outside mainland China stood at a record 2.06 trillion yuan (US$318 billion) at the end of February, according to data published on Wednesday by interbank bond market clearing house China Central Depository & Clearing Corporation.
That was a 3.1 per cent rise over the previous month, the slowest rate of growth since June, but contrasted with a slight contraction in Chinese government bonds holdings by domestic entities, according to Reuters calculations using the data.
Foreign holdings of quasi-sovereign policy bank bonds also rose 3.1 per cent, to 986.97 billion yuan.
Additional monthly interbank bond market data from the Shanghai Clearing House was not available by Wednesday afternoon.
Chinese government bonds were not immune to selling that hit global bond markets in late February as rising expectations of economic growth and fears of a possible spike in inflation made investors retreat, but avoided the worst of the rout.
The yield on benchmark 10-year Chinese government bonds rose 10 basis points in February, compared with a 36-basis point jump in the US 10-year yield.
Wide spreads over US debt turbocharged foreign interest in Chinese yuan-denominated bonds last year as the country emerged early from pandemic-induced lockdowns.
Despite some narrowing, Luca Paolini, chief strategist at Pictet Asset Management, said that he continued to favour investments in Chinese debt.
“Chinese [yuan]-denominated bonds remain the cheapest asset class in our scorecard. A likely appreciation in the [yuan] provides an additional source of return,” he said.
Chinese bonds have also seen foreign holdings rise on inclusion in global indices.
FTSE Russell, which in September said it will add Chinese government bonds to its flagship World Government Bond Index pending a review, is due to announce the results of that review later this month.