According to data released by the People's Bank of China (Central Bank) on the 22nd of July, foreign investors' holdings of Chinese bonds have fallen for the fifth straight month.


As of the end of June, the amount of RMB-denominated bonds traded in the Chinese interbank bond market was 3.57 trillion yuan ($ 527.5 billion). As of the end of May, it was 3,660 billion yuan.


Foreign institutional investors sold 55.9 billion yuan of Chinese government bonds in June, according to data from the China Central Government Bond Registration Consolidation (CCDC). Net sales increased from 14.2 billion yuan in May for the fifth straight month.


While the yield premium has disappeared due to differences in monetary policy, the outflow of funds from overseas has continued since February. Increasing geopolitical tensions and the spread of new coronavirus infections in Japan have also led to a decline in investment motivation.


The 10-year Chinese government bond yield is currently about 12 basis points (bp) below the US Treasury yield. It was nearly 130bp higher at the end of last year.


Iris Pan, China's economist at ING, said further turmoil in the real estate market, such as refusal to repay buyers' loans over unfinished homes, could further undermine the confidence of foreign investors.


On top of that, China's fiscal situation is healthier than other major countries, and with uncertainty about the global economic outlook, the pace of outflows will slow and the yuan will recover some of this year's decline. showed that.


According to data from the People's Bank, foreign ownership of Chinese bonds more than tripled between 2019 and 2009, but remains relatively small, accounting for only 2.9% of the interbank bond market. Most of the bonds held are government bonds and bonds issued by state-owned policy banks.