SHANGHAI- Foreign investors cut holdings of Chinese bonds for a fifth consecutive month in June, official data showed on Friday, as a perception of political risk and a slowing economy sent funds fleeing from what was once a popular trade.
Foreign holdings of yuan bonds traded on China’s interbank bond market totaled 3.57 trillion yuan ($527.5 billion) at the end of June, down from 3.66 trillion yuan a month earlier, the People’s Bank of China (PBOC) said on Friday.
Overseas institutional investors accelerated their pace of selling Chinese government bonds last month by selling 55.9 billion yuan worth of such sovereign debt, booking a fifth straight month of offloading, compared with an outflow of 14.2 billion yuan in May, according to data from depository institutions China Central Depository & Clearing Co.
China’s $20 trillion bond market has suffered continuous foreign outflows since February, as divergent monetary policy has wiped out China’s yield advantage over the United States, while rising geopolitical tension and fresh COVID-19 outbreaks in China have also dampened investor appetite.
The yield of 10-year Chinese central government bonds is roughly 12 basis points lower than that of their US counterparts, compared with a premium of nearly 130 basis points at the end of last year.
More turmoil in China’s property markets, where some homebuyers are refusing to repay mortgages on unfinished apartments, could sour foreigners’ sentiment further, said ING’s China economist, Iris Pang, in Hong Kong.
