Since March, the trading volume under China's Bond Connect program reached 478.2 billion yuan. The program has been set up since 2017 launched as a mutual market access scheme to promote foreign investment in China's mainland interbank bond market using financial institutions in the country's central cities and Hong Kong.
The China Foreign Exchange Trade System (CFETS) announced that China's Bond Connect program has reached 478.2 billion yuan since March. The trading volume has been growing successively despite the global pandemic.
The CFETS also added in its monthly report that the program has been operating robustly with headway in primary and secondary markets. The policy financial and treasury bonds accounted for 50 and 30 percent, respectively, of the total trading volume in March this year.
Turnover of trading in negotiable certificates of deposit, on the other hand, formed 16 percent of the monthly trading volume in China.
The Bond Connect program launched as a mutual market access scheme in July 2017. It enticed foreign investors to capitalize on China's mainland interbank market through financial institutions in the country's mainland and Hong Kong.
Foreign investors were the largest buyers of Chinese government bonds last month, but the additional holdings were acquired at the slowest pace in more than a year as the global market struggles to maintain liquidity.
According to the country's primary interbank bond market clearing house China Central Depositary and Clearing Co. (CCDC), offshore investors held a total of 1.34 trillion yuan at the end of March. The yield showed a 0.15 percent increase of its annual record high but was regarded as the slowest pace of growth since February 2019. Offshore holdings of all policy bank bonds also increased by 1.14 percent to 542.5 billion yuan. Although foreign investors were the net sellers of highly liquid bonds issued by China's central bank.
At present, the total foreign holdings of bonds that cleared through the CCDC increased by 0.32 percent to 1.96 trillion yuan, the highest recorded clearing since the program was implemented. The slight increase in offshore holdings showed the frenzy of trading activity in China.
Last Wednesday, data was released showing offshore investors trading record volumes of bonds through China's Bond Connect program. Some of the net selling of government and policy bank bonds this year manifested global investors' aim to maximize dollar liquidity.
Market volatility also prompted global index providers to suspend the inclusion of Chinese bonds and stocks into their respective benchmarks. Data released by Shanghai Clearing House has yet to be released, but the bonds cleared showed 15 percent of total foreign holdings in recent months.
