This may be the most important chart in global fixed income of 2020. Foreigners are aggressively accelerating their purchases of Chinese bonds, with the pace reaching >$20bn in July alone. #china

Given that Chinese 10Y Government Bond yields are stuck around 3%, while US (and all other major) yields curves have collapsed to zero, it is no major surprise (especially if the currency is also grinding stronger).

Nevertheless, our tracking of real-money fund positioning shows that global investors are still underweight relative to their benchmark (note that benchmarks have been on the move since China inclusion in April 2019). In other words, there is more to come...

There has been a lot of talk about China entering the 'global bond scene', although earlier attempts ran into trouble. But now the trend may be for real, and it could be a mega one. Global fixed income PMs not paying attention are potentially going to have performance issues.

I will leave it at that. Global fixed income is not only about US Treasury yields hitting new lows. There are other mega-trends in play (admittedly, they could be related...). How this evolves will be crucial to global fixed income in years to come. END.