Global investors are returning to Chinese debt in full force, as expectations for US interest rates to soon peak and Beijing’s monetary easing boost the appeal of the world’s second-largest bond market.

Overseas investors bought a net 90.6 billion yuan ($12.6 billion) of notes in China’s interbank market last month, the most since January 2021, increasing their total holdings to 3.28 trillion yuan, according to Bloomberg calculations based on official local data. The interbank market is the country’s main bond trading venue.

June marked the second consecutive month of such inflows, after foreign investors had continued to slash their exposure to Chinese debt following a record exodus last year. The outflows have started easing in recent months, after cooling US inflation prompted a rethink of the Federal Reserve’s policy outlook and an ailing economy triggered a series of rate cuts by China’s central bank.

The inflows in June could be driven by expectations for further rate cuts in China as well as index-related demand, said Zhaopeng Xing, senior China strategist at Australia & New Zealand Banking Group Ltd. “We expect the Fed pause to boost demand for global bonds, and Chinese government bonds will benefit from inflows in the second half.”

Despite their latest return, global investors’ overall holdings of Chinese local bonds were about 3% down year to date as of last month, narrowing from 6% at the of May.