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Investors seek unwinds of China govvies swapped into USD after FX and rates movements dent its appeal
Foreign investors into a popular onshore Chinese government bond carry trade have started to unwind their positions, after foreign exchange moves and US rate cuts made the positions less attractive.
Foreign investors have been piling money into China’s short-term debt market since the last quarter of 2023, using cross-currency swaps to swap the cashflows into US dollars and netting a yield pick-up of 100 basis points or more over US secured overnight financing rate (SOFR) swaps.
However
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