June 3, 2020 / 7:13 AM / a month ago

Offshore Chinese bond holdings rise in May on yield gap appeal

SHANGHAI, June 3 (Reuters) - Foreign investors raised their holdings of Chinese bonds in May, official data showed late on Tuesday, extending their purchases as the yield differential over major markets continued to widen.

Offshore investors held Chinese government bonds worth a total of 1.45 trillion yuan ($204 billion) at the end of May, up 4.3% from April, according to Reuters calculations based on data from the China Central Depository and Clearing Co (CCDC), the country’s primary interbank bond market clearing house.

That increase helped to drive up the value of all bonds cleared through CCDC and held by foreign investors to 2.113 trillion yuan. The total volume was up by 111.9 billion yuan for the month.

Rising interest in Chinese bonds has come at a time when the interest rate gap between the world’s two largest economies continues to widen as the United States cuts rates to near zero. The higher yields have made Chinese debt more attractive, in the context of a generally depressed international bond market.

The yield gap between the benchmark Chinese 10-year government bond and 10-year U.S. Treasuries stood at 206 basis points at the end of last month, compared with 188 basis point at the end of April.

Further investment holdings data from the Shanghai Clearing House was not yet available as of Wednesday. Bonds cleared there have accounted for about 15% of total foreign holdings in recent months.

($1 = 7.1089 Chinese yuan)

Reporting by Winni Zhou and Andrew Galbraith; Editing by Jacqueline Wong

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