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Foreign Investors Slash China Bond Holdings in April as Yuan Dives


Foreign holdings of Chinese bonds had also fallen 2.82% in March.
Holdings of Chinese bonds by offshore investors had also fallen 2.82% in March, the steepest monthly drop since January 2017, and 1.97% in January. Photo: Reuters.

 

Foreign investors slashed holdings in Chinese yuan-denominated bonds for a third month in April as eroding yield premiums and a sliding yuan diminished appeal for the instruments.

Overseas investors held Chinese bonds valued at 3.77 trillion yuan ($558.77 billion) at the end of April, according to Reuters calculations.

The figure was drawn from data released by the China Central Depository and Clearing Co (CCDC) and the Shanghai Clearing House on Wednesday. That was down 2.8% from a month earlier.

Chinese bond holdings by offshore investors had also fallen 2.82% in March, the steepest monthly drop since January 2017, and 1.97% in January.

 

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Foreign Holdings Dip Below 1tn Yuan

The April total included Chinese government bond holdings (CGBs) worth 2.39 trillion yuan, down 1.7% from a month earlier, and policy bank bonds worth 965 billion yuan.

It was the first time foreign holdings of the quasi-sovereign bonds, which yield more than CGB holdings of the same tenor and are among the most liquid instruments traded on China’s interbank bond market, had dipped below 1 trillion yuan since March last year.

The release of the Chinese bond holdings data came after a lengthy delay that CCDC on Tuesday attributed to epidemic-related factors.

The delay had sparked market speculation that officials might be attempting to hide the scope of outflows from Chinese assets as a slowing economy and rising US yields weighed heavily on the yuan.

Data released last week by the International Institute of Finance (IIF) showed the largest quarterly capital outflows on record for China in the first quarter.

The yuan fell more than 4% against the dollar in April, while benchmark 10-year CGBs yielded around 16 basis points less than their US equivalents on Wednesday, down from a nearly 125 basis point premium at the end of 2021.

 

  • Reuters with additional editing by Jim Pollard

 

 

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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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