China’s flat yield curve increases the allure of KCNY, meaning investors do not need to take on the interest rate risk of long duration bonds to grab solid yields. Underscoring the opportunity with an ETF like KCNY, the three-month yield spread between Chinese and comparable U.S. government debt was 3.6% at the end of last year, according to KraneShares data.
CBON, which tracks the ChinaBond China High Quality Bond Index (CDHATRID), holds government debt, quasi-sovereigns and high-grade corporate bonds.
“China’s onshore China debt is the world’s third largest, at $6.5 trillion and making up 35 percent of total emerging market debt. While the onshore equity market has around 3 percent foreign ownership, the onshore bond market has even less with only 2 percent of it owned by foreign investors, according to Brendan Ahern, managing director of KraneShares,” reports Bloomberg.
Market Vectors ChinaAMC China Bond ETF