(Yicai Global) Aug. 17 -- Foreign institutions upped their holdings of yuan-denominated bonds by USD5.95 billion (CNY39.9 billion) last month to strike a new high for the year.

Foreign institutions have now increased such holdings for five consecutive months, the latest bond custody data for July issued by the China Government Securities Depository Trust & Clearing Co., Ltd. and Shanghai Clearing House shows.

Treasury bonds remain the first choice for foreign institutions' fund allocations for yuan-denominated bonds, with added treasury holdings reaching CNY37.8 billion, to also hit a new peak for the year, accompanied by a slight fall in policy-based financial institutional debt of CNY390 million.

After the Bond Connect opened, the average daily settlement of relevant bonds was about CNY259 million and the average number of daily settlements stood at about 7.1, with last month's total settlement about CNY5.76 billion (including opening day), and relevant bond custody up CNY1.565 billion for the month.

The positive impact of the Bond Connect, the reviving yuan and waning global risk aversion are all key reasons for last month's leap.

Although the interest margin of the yuan and the US dollar narrowed last month, it still stands at a high level around 130 basis points, and this also adds luster to onshore yuan bonds for overseas capital.

Foreign institutions holdings of interbank deposits greatly weakened last month to a mere CNY1.1 billion because interbank deposit yields dropped significantly.