Investors looking for yield and an hedge against coronavirus-induced losses in the global equity markets have turned to China this year. Thats evident from the fact that foreign holdings of China’s debt have surged to a record 1.79 trillion yuan, according to data published by ChinaBond.
The spread between 10-year Chinese and US government bond yields has risen to 230 basis points from 125 basis points seen at the start of the year. The Chinese yuan has gained over 6% this year to 6.5355 per US dollar.
The data shows the Chinese assets have performed as safe havens amid the coronavirus pandemic.
China’s debt market could attract $100 billion of inflows annually over the next years on the nation’s relatively restrained easing, its inclusion in global bond indexes and yield differentials, according to Citigroup Inc.
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