SHANGHAI: Offshore investors added to their holdings of Chinese government bonds for a 20th consecutive month in October, official data showed on Wednesday, as a strong yuan and wide spreads over US Treasuries boosted their appeal.

By October-end, foreign holdings of Chinese government bonds stood at 1.73 trillion yuan ($257.94 billion), according to China Central Depository and Clearing Co (CCDC), the country's main interbank market clearing house.

Foreign holdings of Chinese government bonds hit a record high, and were up 3.29% from September-end.

Total holdings of interbank market bonds stood at a record of 2.99 trillion yuan, accounting for 3% of all outstanding interbank market bonds, according to Reuters calculations using the CCDC data and the latest figures from the Shanghai Clearing House.

Offshore investors held exchange-traded bonds worth a total of 64.28 billion yuan, according to Shanghai Stock Exchange data, lifting total foreign holdings of onshore bonds above 3 trillion yuan for a second straight month.

With the benchmark Chinese 10-year government bond nearly 240 basis points above the 10-year US yield , up from about 130 basis points at the end of 2019, Chinese bonds have attracted new interest as a haven this year.

October marked the first full month since index provider FTSE Russell announced that, pending an affirmation in March, it would add Chinese government bonds to its flagship World Government Bond Index (WGBI) next year, a move expected to drive significant inflows.

China had become "too big to ignore," Yoshiko Morishita of Nikko Asset Management said, adding that the interest in China bonds was rising.

But while the FTSE Russell announcement was good news for the market, "some passive investors feel that the barriers to enter the market and track the index remain," she said.

"The FTSE inclusion announcement being conditional, they expect further relaxing prior to the start of actual inclusion in the WGBI."