• RankiaPro Europe
    • RankiaPro Spain
    • RankiaPro LATAM
    • RankiaPro Italy
SUBSCRIBE
Search
Close
  • Home
  • Insights
    EQUITIES
    EQUITIES
    FIXED INCOME
    FIXED INCOME
    ESG
    ESG
    INTERVIEWS
    INTERVIEWS
    MARKET OUTLOOK
    MARKET OUTLOOK
    ETF
    ETF

    Featured

    outside allianz GI
    Insights

    China Briefing

  • News
    APPOINTMENTS
    APPOINTMENTS
    LAUNCHES
    LAUNCHES
    ASSET MANAGERS
    ASSET MANAGERS

    FEATURED

    rankiapro-blackrock-lanza-nuevo-fondo-ucits-asignacion-global-sostenible-europa
    Launches

    BlackRock launches new Sustainable Global Allocation UCITS Fund in Europe

  • Magazine
    RANKIAPRO EUROPE
    RANKIAPRO EUROPE
    RANKIAPRO IBERIA
    RANKIAPRO IBERIA
  • Events
    RANKIA FUNDS EXPERIENCE
    EVENTS & CONFERENCE CALLS
    EVENTS & CONFERENCE CALLS
    RANKIAPRO MEETINGS
    RANKIAPRO MEETINGS
  • Podcast
  • MiFIDII Training
Menu
  • Home
  • Insights
    EQUITIES
    EQUITIES
    FIXED INCOME
    FIXED INCOME
    ESG
    ESG
    INTERVIEWS
    INTERVIEWS
    MARKET OUTLOOK
    MARKET OUTLOOK
    ETF
    ETF

    Featured

    outside allianz GI
    Insights

    China Briefing

  • News
    APPOINTMENTS
    APPOINTMENTS
    LAUNCHES
    LAUNCHES
    ASSET MANAGERS
    ASSET MANAGERS

    FEATURED

    rankiapro-blackrock-lanza-nuevo-fondo-ucits-asignacion-global-sostenible-europa
    Launches

    BlackRock launches new Sustainable Global Allocation UCITS Fund in Europe

  • Magazine
    RANKIAPRO EUROPE
    RANKIAPRO EUROPE
    RANKIAPRO IBERIA
    RANKIAPRO IBERIA
  • Events
    RANKIA FUNDS EXPERIENCE
    EVENTS & CONFERENCE CALLS
    EVENTS & CONFERENCE CALLS
    RANKIAPRO MEETINGS
    RANKIAPRO MEETINGS
  • Podcast
  • MiFIDII Training
Search
Close
Search
Close

Home | The difference hedging costs make for China bonds

The difference hedging costs make for China bonds

Onshore Chinese bonds have delivered the best performance year to date and over the trailing year, outperforming other world bond markets as of the end of July.
Diogo Gomes

Senior CRM

UBS Iberia

2022/09/19

The dramatic drop in hedging costs increases attractiveness of onshore China bonds for USD-based investors. Concerns with the yield differential narrowing between US Treasuries and China government bonds, recurring and economically restrictive COVID related lockdowns, property market crisis worsened by pockets of mortgage boycotts, and rising geopolitical tensions have impacted investor appetite for onshore Chinese yuan (CNY) denominated China bonds.

China

As a result, from an asset allocation perspective, many investors have chosen to curb their China exposure as a whole. Foreign investment in the China bond market has dropped for five consecutive months at the end of June, according to data from China Central Depository & Clearing Co.—a reversal from years of growing international interest and investment in this asset class.

We believe it is also important to look beyond the news headlines. Did you know that onshore China bonds are the only major bond market to deliver a positive return in local currency terms in the first seven months of 2022 (according to data from Bloomberg Finance L.P.)?

In fact, onshore Chinese bonds have delivered the best performance year to date and over the trailing year, outperforming other world bond markets as of the end of July. Their low volatility and low correlation with other major asset classes have shown that onshore China bonds can be an effective portfolio diversifier as clients benefited from such returns.

We still see Chinese bonds as a key standalone strategic allocation in a portfolio, especially for investors looking for attractive nominal yields and real yields. As long-term investors, we often advise to look past the immediate—short-term events and market mood—and focus on your goals for the long run. That continues to be tried and true, but we believe that there is one short-term development that is creating an advantage for onshore China bonds in the current climate: a dramatic drop in CNY hedging costs. Hedging the CNY against the US dollar (USD) turned net positive for USD-based investors in early June for the first time in two years, and it stayed positive as of the end of July.

  • China, china bonds, UBS AM

Related Post

COVER-China-reopening
  • Insights, Market Outlook

Beyond reopening: China’s transformation

Reopening and cheap valuations are just a few of the reasons investors should be looking at China next year.
COVER-Reyes-magos
  • Insights, Market Outlook

Dear Investor, what are you going to ask the Three Wise Men?

We come from a very turbulent 2022 and this new year presents quite a few challenges, but also opportunities and desires to fulfil.
COVER-China
  • Asset Managers, News

Neuberger Berman approved to begin onshore mutual fund business operations in China

With this approval, now the firm will begin operations managing local currency mutual funds for domestic Chinese clients.
NEWSLETTER
If you want to keep up to date with the latest news from the asset management industry and all our events, subscribe now to our newsletter.
Subscribe

Last Tweets

3h

🗣️ Fed moves away from big hikes: raises interest rates by 25 basis points

🔗 #Fed #InterestRates
...#RankiaProEurope
https://rankiapro.com/en/fed-moves-away-from-big-hikes-raises-interest-rates-by-25-basis-points/

3h

🗣️ECB raises rates by 50 basis points and warns of further increases this year

🔗#ECB #Inflation #rates
...#RankiaProEurope
https://rankiapro.com/en/ecb-raises-rates-50-basis-points-warns-further-increases-this-year/

4h

🗣️ @UBP_Group partners with Brigade to widen its liquid alternative offering

🔗#FundLaunch #LiquidAlternatives
... #RankiaProEurope
https://rankiapro.com/en/ubp-partners-brigade-widen-liquid-alternative-offering/

7h

🔝 The top 20 best-selling funds in January 2023
by @HLInvest

🔗#InvestmentFund #BestSelling #RankiaProEurope
...https://rankiapro.com/en/the-top-20-best-selling-funds-in-january-2023/

RankiaPro

  • Home
  • Insights
  • News
  • Magazine
  • Events
  • About us
Menu
  • Home
  • Insights
  • News
  • Magazine
  • Events
  • About us

Terms and uses

  • Cookies Policy
  • Privacy Policy
  • Disclaimer
Menu
  • Cookies Policy
  • Privacy Policy
  • Disclaimer

Contact

  • Email: [email protected]
  • Phone: (+34) 963 386 976
  • Mobile: (+34) 640 308 023

Newsletter

If you want to keep up to date with the latest news from the asset management industry and all our events, subscribe now.

Subscribe

All rights reserved © 2003 – 2021 Rankia S.L.

RankiaPro

  • Home
  • Insights
  • News
  • Magazine
  • Events
  • About us
Menu
  • Home
  • Insights
  • News
  • Magazine
  • Events
  • About us

Terms and uses

  • Cookies Policy
  • Privacy Policy
  • Disclaimer
Menu
  • Cookies Policy
  • Privacy Policy
  • Disclaimer

Contact

  • Email: [email protected]
  • Phone: 963 386 976 – 601 302 692

All rights reserved © 2003 – 2021 Rankia S.L.

Manage Cookie Consent
To provide you the best experience on our website, we use technologies like our own and third-party cookies for analytical purposes and to store device information. Consenting to these technologies will allow us to process data such as browsing behaviour or unique identifiers on this site. Not consenting or withdrawing consent may adversely affect certain features and functions.

To learn more, please read our Cookie Policy and Privacy Statement.
Functionality or Personalisation Cookies Always active
These cookies are necessary for the website to function or for the unique purpose of transmitting a communication over an electronic communications network, and cannot be disabled on our systems. Usually they are set up to respond to actions made by you to receive services, such as adjusting your privacy preferences or filling out forms. You can set your browser to block or alert you to the presence of these cookies, but some parts of the website will not work. These cookies allow the website to provide better functionality and personalisation. They may be set by us or by third parties whose services we have added to our pages. If you do not allow these cookies some of our services will not work properly.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics Cookies
These cookies allow us to count traffic sources in order to measure and improve the performance of our website. Storage or technical access which is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing Cookies
These cookies may be site-wide, placed by our advertising partners. These third parties may use them to create a profile of your interests and show you relevant adverts on other sites. If you do not allow these cookies, you may receive less targeted advertising.
Manage options Manage services Manage vendors Read more about these purposes
Cookie Settings
{title} {title} {title}
  • RankiaPro Europe
    • RankiaPro Spain
    • RankiaPro LATAM
    • RankiaPro Italy
Menu
  • Home
  • Insights
    • Equities
    • ESG
    • ETF
    • Fixed Income
    • Interviews
    • Market Outlook
  • News
    • Appointments
    • Asset Managers
    • Launches
  • Magazine
    • RankiaPro Europe
    • Magazine Iberia
  • Events
    • Rankia Funds Experience
    • Online Events
    • RankiaPro Meetings
  • Podcast
  • MIFIDII Training

Follow us on social media

Linkedin Twitter Youtube Flickr

NEWSLETTER

Subscribe

Book now

The difference hedging costs make for China bonds