Which part of the interest rate parity does not apply to you? Is CNY your main currency?
(USD denominated bonds for China trade ~0.5% above US sovereign, so seems like interest rate parity applies, with the market pricing only a small risk for China default vs. US)
But note that the expected returns are similar to bonds of the same risk in the hedged currency (minus TER), so you’re not much better off than investing in negative yielding confederation bonds, it’s just more diversified.
Good point about the interest rate parity.
If I could buy an ETF focused on Chinese government bonds in CNY I absolutely would.
I don’t think that such a beast exists, at least I can’t find one.
I didn’t explain my perspective. I invest in Chinese equities already mostly via HK, otherwise via an associate having access to the mainland markets. I think that there are some good publicly traded companies over there. It would be very cool to keep some liqudities in CNY, let it grow at a decent rate awaiting buying opportunities. My purpose is not CHF maximization.
Indeed it isn’t. But it’s a good illustration of interest rate parity nonetheless (showing that returns in a different currency will be similar to those of similar risk, e.g. sovereign vs. sovereign).
I did some research with one or two interesting options in Singapore if you want to increase the your RMB exposure and reduce the correlation to equities. As it is a bit long, you will find more details under What access to Chinese bonds? – Guide Finances. My current understanding is that a reduced rate of 7% on bond interest would apply in view of the Sino-Singapore treaty.
That said unhedged bond holdings aren’t usually recommended (and hedged don’t make a lot of sense in current environment).
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