Chinese bond rout continues as global holdings dip to lowest level in five years

Flight to equities increases pressure on China’s debt market as holdings by foreign institutions fall for a third straight month

Overseas funds offloaded Chinese sovereign bonds in August, cutting holdings to the lowest level in almost five years and piling pressure on a debt market already reeling from a shift by investors into stocks.

Holdings by foreign institutions fell for a third straight month in August to 2.01 trillion yuan (US$282 billion), the lowest level since January 2021, according to Chinabond data.

That represented 5.2 per cent of the total outstanding amount of Chinese sovereign debt as of the end of August, according to Bloomberg calculations.

Foreign appetite for Chinese debt is waning, with yields trailing Treasuries. August’s sell-off highlighted the shift as investors moved into local stocks, helping push the CSI 300 Index up more than 25 per cent from April lows.