SHANGHAI, Sept 6 (Reuters) - Global investors raised their holdings of Chinese government bonds (CGBs) to a record high for a fifth straight month in August, official data showed on Monday, though the pace of increase slowed as yield premiums fell. Foreign investors held CGBs worth 2.2 trillion yuan ($340.77 billion) at the end of August, according to data released by interbank bond market depository China Central Depository & Clearing Co (CCDC). That was an all-time high, and up 0.8% from a month earlier. Offshore investors’ holdings of policy financial bonds, issued by China’s policy banks, stood at 1.05 trillion yuan, also a record and also up about 0.8% from the end of July. Holdings of local government bonds surged, albeit from a low base, rising nearly 60% on the month to a record 9.45 billion yuan, up 183% so far this year. Total foreign holdings of bonds cleared through CCDC totalled 3.41 trillion yuan, up 0.9% on the month, the data showed. Additional monthly interbank market data from the Shanghai Clearing House was not yet available. While holdings rose, the pace of growth slowed as the spread between the Chinese and U.S. 10-year yield, narrowed by about 10 basis points in August. That spread may narrow further amid expectations that China’s central bank will loosen monetary policy to cope with a slowing economy, even as the Fed prepares to taper stimulus. CGBs are set to be included in index provider FTSE Russell’s flagship World Government Bond Index (WGBI) over 36 months from the end of October, a move expected to draw billions of dollars into the world’s second-largest bond market. ($1 = 6.4560 Chinese yuan) (Reporting by Andrew Galbraith; Editing by Alexander Smith) Our Standards: The Thomson Reuters Trust Principles.