January 9, 2018 / 8:47 AM / a year ago

Offshore investors raise China bond holdings for 10th month in December

SHANGHAI, Jan 9 (Reuters) - Offshore investors added to holdings of Chinese bonds in December, capping off 10 consecutive months of increases as high yields and a stronger yuan attracted money into the world’s third-largest bond market.

Total offshore holdings of bonds in China’s interbank market rose 40.1 billion yuan in December to 1.15 trillion yuan ($176.8 billion), according to Reuters’ calculations based on data from the China Central Depository and Clearing Co (CCDC) and the Shanghai Clearing House (SCH), the country’s primary bond clearing houses.

Holdings of Chinese treasury bonds by overseas investors rose 33 billion yuan in December to 606.5 billion yuan.

For the year, overseas holdings of all interbank market bonds rose 43.5 percent.

High yields on negotiable certificates of deposit (NCD), a type of short-term debt popular among smaller banks, helped to push offshore holdings of the instruments up by 1.4 billion yuan in December to 140.4 billion yuan, compared with total offshore NCD holdings of just 2.1 billion yuan a year earlier.

The yield on three-month AAA-rated NCDs hit a record high of 5.3481 percent on Dec. 28 as banks scrambled for cash before the end of the year.

Adding to the allure of the onshore market, China’s yuan posted its strongest performance in nine years last year.

$1 = 6.5043 Chinese yuan Reporting by Andrew Galbraith; Editing by Jacqueline Wong

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