Foreigners quicken pace of Chinese bond-buying in Nov as yuan stabilizes

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SHANGHAI, Dec 12 (Reuters) – Net foreign inflows into China’s giant bond market jumped nearly fivefold in November from a month earlier, as yield-hungry global investors snapped up nearly $10 billion worth of Chinese debt last month as the yuan stabilized against the dollar.

China’s $13 trillion bond market, the world’s second biggest, has witnessed nine consecutive months of net foreign inflows. Analysts expect the trend to continue as Beijing steps up efforts to attract inbound capital.

Net foreign purchases of Chinese bonds totalled 69.9 billion yuan ($9.93 billion) in November, a surge from 10.8 billion yuan in October, according to Reuters calculations based on official data.

Gu Weiyong, chief investment officer at Shanghai-based asset manager Ucom Investment Co, said the yuan’s stabilization against the greenback in recent months has revived foreign interest in Chinese bonds.

“Foreign money will continue to gush in as Chinese bonds offer enviable yields for global investors.”

China’s benchmark 10-year treasury yields roughly 3.2%, compared with 1.8% for U.S. counterparts. Investors in Europe and Japan suffer from negative interest rates.

“With the Chinese market increasingly opening to international investors, this is a good opportunity for us,” wrote Sandor Steverink, Head of Treasuries at Dutch pensions manager APG, which started investing in Chinese onshore bonds last month.

At the end of November, foreigners held nearly 2.2 trillion yuan worth of bonds, up one-fifth from the beginning of the year, according to data from the China Central Depository and Clearing Co and the Shanghai Clearing House. Foreign flows into China have been supported by the 20-month phased inclusion of Chinese bonds in the Bloomberg Barclays Global Aggregate Index, which began in April.

JPMorgan said in September that it would add Chinese government bonds to its emerging market local currency bond index from February 2020.

$1 = 7.0389 Chinese yuan
Reporting by Samuel Shen, Wu Fang and John Ruwitch, Editing by
Sherry Jacob-Phillips

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