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Foreigners Snapping Up China’s Bank Debt May Boost Yuan Defense - BLOOMBERG
(Bloomberg) -- China’s bond selloff is creating pockets of opportunity for foreign investors, who can swap dollars for more attractive yuan-denominated short-term bank debt — and inadvertently bolster Beijing’s support of its currency.
The yield on one-year AAA-rated negotiable certificates of deposits, short-term debt issued by banks, rose to 2.03% this week, the highest since June, according to data compiled by Bloomberg.
That’s luring buying from global investors, according to traders. The premium between the FX-hedged one-year NCDs and a US bill of the same tenor jumped to the highest this year in March, also an indication of the former’s increased attractiveness.
Higher foreign inflows may help the People’s Bank of China curb volatility in the yuan at a time when the prospect of escalating trade tensions between the US and China have roiled market sentiment.
