(Yicai Global) Aug. 4 -- Chinese government bond prices have been rising again since the middle of last month, with overseas investors playing an active role.

“Although it is necessary to be vigilant about credit risks in the second half of the year, the trend of a tight macro environment has changed, and we have been all in for Chinese government bonds,” an investment manager at a foreign asset management company told Yicai Global.

Potential changes in economic policy ignited investor sentiment in the bond market. “The stock market tends to be more volatile in the short term, so low risk appetite is conducive to government bonds,” said Xia Yinyin, China interest rate market strategist at UBS Securities.

The yield on China’s 10-year government notes dropped to 2.824 percent on Aug. 2, the lowest in more than a year, as eager foreign investors continue to boost their holdings. It opened at 2.845 percent today.

“In addition, the central government has rolled out a series of measures to ensure the supply of bulk commodities and stabilize transaction prices, which will help alleviate market concerns about inflation in the second half of the year,” Xia added.

"We are particularly optimistic about Chinese government bonds,” a person from BlackRock Investment Research Institute told Yicai Global. “Among global low-yield bonds, the Chinese ones are still considered a key asset class. I am strategically bullish on Chinese assets."

According to Deutsche Bank’s estimates, overseas investors will increase their share of China’s bond market to 3.3 percent by the end of 2021 from 2.9 percent last December.

Editors: Tang Shihua, Futura Costaglione