November 6, 2017 / 4:01 AM / in 10 months

Offshore buyers raise holdings of Chinese bonds for 8th month in October

SHANGHAI, Nov 6 (Reuters) - Offshore institutions raised their holdings of Chinese bonds in October, the eighth straight month of increases, as a firmer yuan boosted the attraction of relatively high yields on Chinese debt.

Holdings of Chinese treasury bonds by overseas investors rose 32.9 billion yuan in October to 559.1 billion yuan ($84.3 billion), according to Reuters’ calculations based on data from the China Central Depository and Clearing Co (CCDC), the country’s primary clearing house.

The data showed that offshore investors accounted for 4.7 percent of Chinese government bond holdings in October, up from 4.5 percent in September.

Offshore investors increased their holdings of all forms of Chinese bonds cleared by CCDC by a net 25.3 billion yuan in October to 921.3 billion yuan, with sales of policy bank bonds partly offsetting the increase in Chinese government bonds.

Offshore holdings of all Chinese bonds cleared by CCDC rose 142.5 billion yuan in the first 10 months of the year.

Market players say Chinese government debt continues to offer tempting yields for offshore investors, particularly as they look for opportunities to diversify into Chinese fixed-income securities.

“Onshore CNY assets are attractive for foreign investors from a portfolio diversification perspective, especially given likely low percentage holdings as a start,” said Frances Cheung, head of Macro Strategy for Asia at Westpac.

The yield on benchmark 10-year Chinese government bonds was at 3.876 percent on Monday, down 6 basis points from three-year highs reached last week.

Total foreign holdings of bonds cleared by CCDC and the Shanghai Clearing House surpassed 1 trillion yuan for the first time in September, data from the clearing houses showed. Shanghai Clearing House had not released October data as of Monday morning.

The yuan gained 0.3 percent against the U.S. dollar in October after losing about 1 percent of its value against the greenback the month before, its biggest monthly loss since November 2016.

$1 = 6.6359 Chinese yuan Reporting by Andrew Galbraith; Editing by Jacqueline Wong

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