Redemption of foreign stalls of Chinese government bonds

The huge backlog of foreign stakes in Chinese government bonds has stalled, and international investors have stopped buying as China’s interest advantage over the U.S. has shrunk.

International ownership of China’s public debt fell slightly in March to the equivalent of $ 313 billion, according to China’s Central Depository and Clearing. Holdings fell about 1% to 2.04 trillion yuan, from 2.06 trillion yuan a month earlier.

It was the first decline in foreign investor positions since February 2019. It happened in a month when the yuan weakened by more than 1% against the dollar, after strengthening by more than 9% from June to February.

Meanwhile, the prices of US treasury bills and other global sovereign debt are falling, increasing yields. This has reduced the additional yield that China’s sovereign debt offers in relation to international rivals.

This range narrowed to about 1.6 percentage points, after reaching 2.2 percentage points in the second half of last year, according to data from FactSet and brokerage house Tullett Prebon.

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