(Yicai Global) May 6 -- Overseas investors have majorly increased their holdings of Chinese bonds during the first month that such debt instruments were included in the Bloomberg Barclays Global Aggregate Index.
The value of Chinese bonds that global investors held rose 60 percent to CNY35.6 billion (USD5.3 billion) last month, China Securities Journal reported yesterday.
Yuan-denominated government and policy bank securities started to be fed into the Bloomberg Barclays Global Aggregate Bond Index on April 1, a process that will take 20 months. When fully included, the bonds will be the index's fourth-largest component behind those based on the US dollar, the euro and the Japanese yen.
Bond Connect, a mutual market access scheme that allows foreign nationals to purchase Chinese bonds, posted a transaction volume worth CNY116.9 billion in April, up 4 percent from a previous month. Policy bank bonds made up over one half of the total at CNY59.1 billion. Interbank deposits, meaning transfers of money stashed in another bank, accounted for 26 percent with CNY30.1 billion.
Fuzhou-based Industrial Bank and Shanghai Pudong Development Bank issued CNY1.4 billion worth of interbank deposits to 10 investors through Bond Connect on April 29, which was the first release of interbank deposits through the program.
Bond Connect added over 130 foreign institutional investors in April, including the first groups from Sweden and the Netherlands, to the total of 27 countries and regions worldwide. The program that was established in July 2017 had attracted over 800 institutional investors by the end of last month.
JPMorgan Chase's global index team has predicted that the inclusion of Chinese debt instruments in the world's three major fixed income indexes, the BBGA, the J.P. Morgan Government Bond Index-Emerging Markets Global Diversified and the Financial Times Stock Exchange World Government Bond Index, will result in capital inflows of USD250 billion to USD300 billion.
Editor: Emmi Laine