China Bond Connect sees record trade in March amid coronavirus panic

Credit: REUTERS/BOBBY YIP

Offshore investors traded record volumes of bonds through China's Bond Connect programme in March amid a coronavirus outbreak that continued to paralyse the country's economy, and as its spread prompted a flight to safety in global markets.

SHANGHAI, April 1 (Reuters) - Offshore investors traded record volumes of bonds through China's Bond Connect programme in March amid a coronavirus outbreak that continued to paralyse the country's economy, and as its spread prompted a flight to safety in global markets.

Trading volumes through Bond Connect totalled a record 478.2 billion yuan ($67.52 billion) in March, data from Bond Connect Company showed on Wednesday, up 67.7% from the previous month.

Trading tickets totaled 5,007, also a record, up from 3,608 in February. The Bond Connect data did not include information on offshore bondholdings, which totalled a record 2.3 trillion yuan at the end of February.

Foreign investors have steadily increased their investments in onshore Chinese bonds over the past year, driven by a stable yuan, attractive yields and gradual inclusion in global fixed-income indexes.

But market sources have seen some net selling of Chinese government and policy bank bonds in recent weeks as a global financial panic, sparked by the coronavirus pandemic, led to a rush for dollar liquidity. Market volatility has prompted global index providers to delay the inclusion of Chinese bonds and stocks into their benchmarks.

Foreign investors sold a net 67.88 billion yuan worth of mainland A-shares through China's Stock Connect scheme in March, a record outflow, data from Hong Kong Exchanges and Clearing showed.

Analysts say stability in the yuan's exchange rate with the U.S. dollar in recent weeks CNY=CFXS shows attempts by China's central bank to stabilise sentiment and offset capital outflow pressure.

Launched in July 2017, Bond Connect offers offshore investors access to China's interbank bond market through its "Northbound" leg. China has yet not implemented a "Southbound" leg, which would allow onshore investors to trade bonds in Hong Kong and overseas markets.

($1 = 7.0821 Chinese yuan)

(Reporting by Andrew Galbraith; Additional reporting by Luoyan Liu; Editing by Vinay Dwivedi)

((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging: andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))

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