Foreign investors buy high-yield Chinese bank debt

Foreign investors are increasingly buying Chinese interbank debt, particularly negotiable certificates of deposit (NCDs), due to rising yields and favorable currency exchange rates. This marks a shift after a decline in Chinese government bond purchases since September 2024. As of February, foreign holdings of NCDs reached a record 1.14 trillion yuan ($157.51 billion), with three consecutive months of buying. The yield on one-year NCDs has risen to about 2%, surpassing U.S. Treasury yields. Investors are attracted to Chinese bonds because of their low correlation with global markets and rising local yields. The current environment offers a potential hedge against U.S. interest rate cuts, making these investments appealing.