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Global Funds End Two-Year Buying Spree in China Government Debt
Bloomberg 1 hr ago Bloomberg News
(Bloomberg) Global funds trimmed holdings of China’s government debt for the first time in two years in March, as their yield premium over Treasuries narrowed and authorities announced plans for more debt sales.
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Foreign investors held 2.04 trillion yuan ($312 billion) of Chinese government bonds as of the end of last month, data from ChinaBond show. That’s 16.5 billion yuan lower than the record amount held in February, according to calculations by Bloomberg. The last time overseas institutions cut holdings was February 2019.
While Chinese bonds have emerged as a haven during the global debt rout this year, the surge in Treasury yields to levels last seen in January 2020 have dimmed their appeal. Inflows may also slow after FTSE Russell said last month an inclusion of the nation’s debt into its global index will take three years, instead
KUALA LUMPUR (April 8): Foreign holdings of Malaysian government bonds, namely Malaysian Government Securities (MGS) and Government Investment Issue (GII), rose by RM4.4 billion to RM215 billion or 25% of total outstanding in March the highest share since April 2018.
Foreign investors holdings of MGS rose RM1.5 billion to RM184.6 billion, equivalent to 40.8% of total MGS outstanding.
Meanwhile, foreign holdings of GII stood at RM30.7 billion, equivalent to 8% of total GII outstanding in March, said UOB Global Economics and Market Research. The bond inflows were resilient compared to sharper sell-offs of emerging market debt in March amid steepening yield curves. As policy rates are projected to remain flat for 2021 and major central banks are expected to continue bond purchases to smooth out the yield path, we think foreign flows into Malaysia s bonds will remain supported, it said in its Flash Note today.
(Recasts, adds detail and analyst comment)
SHANGHAI, April 7 (Reuters) - Foreign investors reduced their holdings of Chinese sovereign bonds in March, the first monthly drop in more than two years, as narrowing spreads over overseas debt and a weaker yuan tarnished their appeal.
Overseas investors held Chinese government bonds (CGBs) worth 2.04 trillion yuan ($311.9 billion) at the end of March, down from 2.06 trillion yuan a month earlier, according to data released Wednesday by interbank market depository China Central Depository & Clearing Co (CCDC).
It was the first decrease in foreign CGB holdings since February 2019, Reuters calculations showed.
Holdings by offshore investors of all interbank market bonds dipped by 8.95 billion yuan in March, according to Reuters calculations using data from CCDC and the Shanghai Clearing House. That was the first monthly decline since March 2020, when global pandemic lockdowns sparked widespread market sell-offs.
Nevertheless, the actual risk of exclusion is low, they add.
“It is unlikely that Malaysia will be removed from FTSE Russell’s WGBI given the positive discussions between FTSE Russell and the regulatory authorities, along with the ongoing effort by Bank Negara Malaysia to provide better market access for foreign investors,” senior economist Wong Khai Jhek of RAM Rating Services Bhd tells The Edge.
“That said, should FTSE Russell decide that more time is needed to assess the efficacies of some of the more recent liberalisation initiatives, there is still a possibility that it might decide to keep Malaysia on its watch list, albeit the probability is certainly lower than before,” he adds.