Foreign Holdings of Chinese Bonds Hit Record on Swap Tailwind
- Overseas funds boost position in onshore bonds for ninth month
- Currency-hedged yields for Chinese debt higher than Treasuries
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Global investors boosted their holdings of Chinese bonds to a record last month, taking advantage of a market anomaly that allows a premium when swapping dollars into the yuan.
Foreign funds held 4.22 trillion yuan ($582 billion) of onshore yuan bonds in the interbank market at the end of May, according to data from the People’s Bank of China. Most of the purchases were in short-term bank debt — a favored instrument for swap strategies — while government bonds saw year-to-date outflows, Bloomberg calculations show.