(Yicai) April 21 -- Foreign institutions have increased their holdings of Chinese yuan-denominated bonds since the start of this year, showing a positive outlook on China's bond market.

The size of the bond holdings of more than 1,160 foreign institutions rose CNY270 billion to CNY4.5 trillion (USD37 billion to USD616.4 billion) as of April 15 from the end of last year. China's bond market topped CNY183 trillion (USD25.07 trillion) to rank second in the world.

China's bond market has a strong appeal in terms of actual yield and hedge attributes, according to industry experts. With the overall improvement of China's economic performance, the fluctuation in the price of Chinese bonds is slight, with stable returns, they added.

In addition, Chinese bonds have a high value of diversification and investment, and their hedge function continues to strengthen. The yield correlation between Chinese bonds and US, European, and emerging markets stocks and bonds was close to 0 last year, according to Fidelity Investments.

However, significant room remains for the opening-up of China's bond market, with it still at a relatively low level compared to developed and some emerging economies. Foreign investors' share of Chinese bond holdings was only 2.4 percent, with foreign institutions holding around CNY2 trillion (USD274 billion) of Chinese government bonds, accounting for about 5.9 percent of the total.

The People's Bank of China, the country's central bank, has been promoting Chinese bonds to become offshore eligible collateral since last year, supporting foreign institutions using Bond Connect bonds to pay Swap Connect margins. It has also promoted bond market connectivity and collaboration with the Middle East, Latin America, Europe, Africa, and other regions.

The PBOC will continue to advance the high-level opening-up of China's bond market, deepen and expand the interconnectivity between domestic and foreign bond markets, continuously optimize the investment environment, and attract more foreign investors, especially long-term ones, to invest in the country's bond market.

Editor: Martin Kadiev