Foreign investors have emerged as the biggest buyers of government bonds in China’s domestic market this year, a surprise development that is largely due to the inclusion of Chinese bonds in a major global index and the yuan’s resilience.

Those overseas investors, primarily big institutional investors as well as central banks and sovereign-wealth funds, have bought a net 229.4 billion yuan ($35.9 billion) of the government bonds in 2018. The second-place group of investors, Chinese brokerages, have net purchases of a total of 41 billion yuan.

The surge in foreign buying has picked up since late March, when Bloomberg LP said it would add Chinese bonds to the Bloomberg Barclays Global Aggregate Index, becoming the first of the world’s three major bond indexes to include them.

“The index inclusion of the Chinese market has definitely had a big impact on demand because many global investors track such indexes when allocating their money,” said Peter Ru, Shanghai-based chief investment officer for China fixed income at Neuberger Berman Investment Management.

Goldman Sachs Group Inc. estimated last year that Chinese bonds’ eventual inclusion in the world’s three major bond indexes— JPMorgan Chase & Co. and Citigroup Inc. run the other two—could trigger fund flows of up to $250 billion into the market.

In all, foreign investors’ holdings of Chinese government bonds had reached a record 836 billion yuan by the end of May, according to data provider Wind Info, double the amount a year ago and marking the 15th consecutive monthly rise.

Their presence in Chinese domestic bonds is small overall, at 1.7% of the $12 trillion market. China’s banks, insurers, brokerages and mutual funds dominate bond ownership.

Foreign investors’ increasing appetite for Chinese bonds, especially government paper, has coincided with a sharp rebound in the market in recent months. The yield on the benchmark 10-year Chinese government bond has fallen to 3.66% from a three-year high of 4% in mid-January. Bond prices rise when yields drop.

“Despite the recent drop in Chinese bond yields, they remain attractive in the global context,” said Liu Dongliang, senior analyst at China Merchants Bank. The yield on 10-year U.S. Treasurys is 2.97%.

The foreign interest has grown amid uncertainty about the outlook for the world’s second-largest economy. Data released Thursday showed a slowdown in growth in May in economic areas including investment and retail sales.

Beijing has worked to improve foreigners’ access to its bond market in recent years. Last July, it launched a bond-trading link between mainland China and Hong Kong, granting access to international investors with trading accounts in the former British colony. The year before, foreign investors with trading accounts inside China were first able to access the bond market.

A surprisingly resilient yuan in recent months, particularly compared with battered emerging-market peers such as the Argentine peso and the Turkish lira, has also made a difference. The yuan has gained 1.6% against the U.S. dollar since the beginning of this year, after a 6.3% rise last year.

As global central banks increase their holdings of the yuan as a reserve currency, they need to find a place to park the money, and government bonds are a natural choice,” said Kevin Wang, Shanghai-based vice president of the financial market division at Bank SinoPac (China) Ltd.