Foreign investors made record net purchases of Chinese bonds traded through the country's Bond Connect programme in July, boosted by record yield premiums over U.S. debt.
Net inflows into Chinese bonds through Bond Connect, which gives global investors access to the country's onshore bond market through Hong Kong, totalled 75.5 billion yuan ($10.83 billion) in July, Bond Connect Co. said in a statement dated Friday.
Bond Connect Co. is a joint venture between the China Foreign Exchange Trade System (CFETS) and Hong Kong Exchanges and Clearing Ltd.
Total trading volumes stood at 446.9 billion yuan in July, Bond Connect Co. said. That was up 5.9% from a month earlier, but below a record 478.2 billion yuan in March, when the rapid international spread of the new coronavirus drove a global flight to safety.
Spreads between benchmark Chinese 10-year government bonds and their U.S. equivalents touched a record high in of more than 257 basis points in July, Refinitiv data showed.
Analysts say widening spreads reflect the differing approaches of the U.S. and Chinese central banks. The Federal Reserve is facing dimming hopes for a quick economic rebound, while China is steadily recovering from the coronavirus crisis, allowing the People's Bank of China (PBOC) to switch from emergency mode to focus more on financial risks and curtailing speculation.
The Fed on Wednesday kept interest rates near zero and pledged to continue pumping money into the economy as the COVID-19 pandemic wreaks havoc on business and consumer spending.