August 3, 2018 / 9:01 AM / a year ago

Offshore holdings of Chinese government bonds reach new high in July

SHANGHAI, Aug 3 (Reuters) - Offshore holdings of Chinese government bonds rose for a 17th consecutive month in July, data from China’s primary bond clearing house showed on Friday.

Investors outside of China boosted their Chinese government bond positions by 65.1 billion yuan in July to 980.4 billion yuan ($142.36 billion), according to Reuters’ calculations based on data from China Central Depository and Clearing Co.

The purchases brought the proportion of outstanding Chinese government bonds held by offshore institutions to a record high 7.7 percent, up from 7.3 percent a month earlier.

The steady flow of offshore investment into Chinese onshore bonds comes despite a rapid weakening of the yuan against the U.S. dollar, and a narrowing of the gap between the yields on bonds in China and the U.S.

The yuan weakened to a 14-month low against the dollar on Friday, with the currency on course for its longest streak of weekly losses since the market exchange rate was unified in 1994, amid persistent fears of the impact of the Sino-U.S. trade war.

Thomson Reuters Eikon data showed the yield on benchmark 10-year Chinese government bonds at 3.490 percent on Friday. The spread between 10-year U.S. Treasury bonds and their Chinese equivalents was at 51.9 basis points, a narrowing of 30.5 basis points since the end of May.

$1 = 6.8867 Chinese yuan Reporting by Andrew Galbraith; Editing by Richard Borsuk

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