(Adds details and comments)
SHANGHAI, May 15 (Reuters) - Foreign investors resumed
reducing their holdings of China's onshore yuan bonds in April,
after marginally increasing them the previous month, official
data showed on Monday, as widening yield differentials between
the world's two largest economies discouraged inflows.
Foreign holdings of yuan-denominated bonds traded on China's
interbank market stood at 3.17 trillion yuan ($458.62 billion)
at end of last month, down from 3.21 trillion yuan at end-March,
the central bank's Shanghai head office said.
In March, overseas institutional investors bought a net 10
billion yuan worth of yuan bonds.
The resumption of bond selling came as domestic investors'
hopes grew that Beijing may roll out fresh monetary stimulus,
including interest rate cuts, to aid economic recovery. And the
Federal Reserve signalled a potential pause in its tightening
cycle.
"With the Fed showing little appetite for cutting policy
rates this year, lowering policy rates in China might widen
interest rates differentials with the U.S., spurring RMB
depreciation and capital flight," said Ting Lu, chief China
economist at Nomura.
Ten-year U.S. Treasury yields were traded 67
basis points higher than their Chinese counterparts at the end of last month.
"Outflows from Chinese government bonds are expected to
persist as yield differentials are still in negative territory
and U.S.-China tensions could weigh on foreign interest,"
strategists at DBS said in a note.
($1 = 6.9121 Chinese yuan)
(Reporting by Beijing Newsroom, editing by Ed Osmond and Hugh
Lawson)
Messaging: winni.zhou.thomsonreuters.com@reuters.net))
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