July 3, 2019 / 6:24 AM / 5 months ago

Offshore China govt bond holdings in June rise at fastest pace this year

SHANGHAI, July 3 (Reuters) - Offshore investors bought Chinese government bonds at the fastest pace so far this year in June, lifting their holdings of the sovereign debt to a record high for a fourth consecutive month.

Total holdings of Chinese government bonds by offshore investors stood at a record 1.16 trillion yuan ($168.48 billion) at the end of June, according to Reuters calculations using data released on Wednesday by the China Central Depository and Clearing Co, the country’s primary bond clearing house.

That was up 2.43% from a month earlier, the largest percentage monthly increase in holdings of the bonds since December.

Offshore holdings of bonds issued by China’s policy banks also reached a record high, rising 1.32% from the previous month to 425.38 billion yuan. But the rate of increase paled in comparison to a 13.8% jump in May, when a sharp rise in risk aversion boosted inflows into fixed income investments.

That month saw record foreign outflows of 53.67 billion yuan from onshore equities. In contrast, foreigners were net buyers of Chinese shares in June, with inflows totalling 42.6 billion yuan, data from the Hong Kong Exchanges and Clearing Co showed.

In April, the Bloomberg Barclays Global Aggregate Index began including policy bank bonds, issued by China Development Bank, the Agricultural Development Bank of China and the Export-Import Bank of China, alongside Chinese government bonds. The 20-month phased inclusion of Chinese bonds will take China’s weight in the index to 6.03 percent.

Data from Bond Connect, which offers access to China’s onshore interbank market through Hong Kong, showed trading volumes and average daily turnover once again reached record highs in June.

Additional data on holdings of bonds traded on China’s interbank market, from the Shanghai Clearing House, were not yet available on Wednesday afternoon.

$1 = 6.8849 Chinese yuan Reporting by Andrew Galbraith; Editing by Jacqueline Wong

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