Foreign investors trimmed their holdings of Chinese sovereign and quasi-sovereign bonds in January, according to new data, suggesting that concerns over rising interest rates and currency depreciation are cooling foreign demand for renminbi paper.

Foreign institutions cut holdings of Chinese government bonds by Rmb1.9bn ($277m) in January from a month earlier to Rmb422bn, the first monthly decline since October 2015, according to data from China Central Depository and Clearing. They also cut holdings of bonds issued by China’s three policy banks — China Development Bank, Agricultural Development Bank of China, and the Export-Import Bank of China — by a combined Rmb21bn, bringing the total to Rmb284bn.

In addition to renminbi depreciation, which makes Chinese bonds less attractive to foreign investors, China’s central bank has tightened monetary policy moderately in recent weeks. Bond prices fall when interest rates rise. The People’s Bank of China has raised interest rates on cash offered through its reverse repos, Standing Lending Facility, and Medium-term Lending Facility.

But the latest data doesn’t capture foreign holdings of bonds for which China Central Depository does not serve as custodian. That includes exchange-traded bonds and corporate bonds held in custody at the other main clearinghouse for the interbank market, Shanghai Clearing House.

Foreign holdings of Chinese onshore bonds of all types totaled Rmb853bn at the end of December, according to the latest figures from PBoC.

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