FOREIGN investors raised their holdings of Chinese government bonds (CGBs) in November at the fastest pace in 10 months, supported by passive foreign flows as a major global index began including the instruments.

Overseas investors bought 87.9 billion yuan (US$13.8 billion) in the bonds last month, more than three times their October purchases, according to data from ChinaBond. Their overall holdings surged to a record-high of 2.39 trillion yuan at the end of November. That was a record high and the quickest monthly percentage increase since January.

November marked the first full month of phased inclusion of CGBs in FTSE Russell’s World Government Bond Index (WGBI). Inclusion is expected to eventually drive US$130 billion in index-related foreign inflows into the bonds over a 36-month period.

Offshore investors’ holdings of quasi-sovereign bonds issued by China’s policy banks, typically among the most liquid in China’s interbank bond market but which are not included in WGBI, slipped 0.15 percent to 1.07 trillion yuan. It was the first such dip in holdings since April 2020.

“The yuan’s resilience and low volatility raised the appeal of Chinese onshore bonds,” said Xing Zhaopeng, a senior China strategist at Australia & New Zealand Banking Group Ltd. Inflows related to the central bank’s reserve diversification remain strong, he added.

The onshore yuan gained 0.6 percent in November and it’s poised to become Asia’s best-performing currency this year with 2.9 percent gains on the back of a strong trade surplus and robust inflows. (SD-Agencies)