Overseas institutions are swarming into China's bond market, driven by higher yields and weakening risk of yuan depreciation.
The total amount of yuan bonds owned by overseas institutions under the depository of the China Central Depository & Clearing Co. surged to a record high of 1.65 trillion yuan (about 243 billion U.S. dollars) at the end of June, up 34.62 billion yuan from the end of May, data showed. This marked a seventh straight month of increases.
Foreign investors boosted their holdings of Chinese bonds during the first half of the year mainly due to the incorporation of Chinese bonds into major global bond indices and the widening gap between Chinese and overseas bond yields.
Starting in April, a total of 364 onshore Chinese bonds will be added to the Bloomberg Barclay Global Aggregate Index over the next 20 months, marking another milestone in the opening up of China's financial markets.
The U.S. 10-year bond yield fell to a nearly three-year low of 1.95 percent on Wednesday, compared with the Chinese 10-year bond yield of around 3.15 percent.
With global bond yields heading toward record lows, the country is likely to see more foreign funds flow into its bond market in the near future.