Foreign investors increase China’s onshore bond holdings in November

FOREIGN holdings in China’s onshore yuan bonds increased for the third consecutive month in November as the interest rate gap between China and the US narrowed to its lowest in more than four months.

Foreign institutions held 3.49 trillion yuan (S$653.3 billion) in bonds traded on China’s interbank market as of the end of November, the central bank’s Shanghai head office said, up from 3.24 trillion yuan a month earlier.

The downside pressure on the yuan has been easing since November, helped by a softening US dollar.

The 10-year US treasuries yield broke below 4 per cent after the US Federal Reserve said the historic tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming “into view”.

The yield gap between 10-year US and China government bonds narrowed to 1275 basis points, the tightest since the end of July.

Wang Chunying, spokeswoman at the State Administration of Foreign Exchange (Safe), said the willingness of foreign investors to allocate yuan bonds has continued to rise, with a net increase in onshore bond holdings in recent months. REUTERS