SHANGHAI, Aug 16 (Reuters) - Foreign holdings in China's onshore yuan bonds declined in July, official data showed, due to the interest rate differential between China and the U.S. and investors' disappointment that Beijing has not delivered enough economic stimulus as yet.
Foreign institutions held 3.24 trillion yuan ($444 billion) in bonds traded on China's interbank market as of the end of July, the central bank's Shanghai head office said on Tuesday, down from 3.28 trillion yuan a month earlier.
The latest data suggests foreign holdings, which now account for 2.5% of China's interbank bond market, started falling again in July after rising in May and June.
China's July Politburo meeting failed to lift investor sentiment and the real estate sector's debt problems have also hurt confidence in the world's second largest economy.
Lemon Zhang, foreign exchange & emerging market macro strategist at Barclays said a "brief relief rally across assets" after the Politburo meeting petered out due to the failure to roll out stimulus measures quickly, sending bond flows in reverse.
The yield differential between China and the U.S. also deterred bond inflows. The spread between 10-year Chinese government bond and U.S. treasuries became the widest since 2007 after China cut key policy rates on Tuesday.
($1 = 7.2935 yuan) (Reporting by Li Gu in Shanghai and Tom Westbrook in Singapore; Editing by Tom Hogue & Simon Cameron-Moore)
