HKMA enhances renminbi bond repo business
08 July 2025 Hong Kong
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The Hong Kong Monetary Authority (HKMA) has introduced enhancements to the offshore renminbi bond repo business.
Facilitating the participation of Northbound Bond Connect investors in the repo business, the authority welcomes two enhancements which will come into effect on 25 August 2025.
These are supporting the rehypothecation of bond collaterals during the repo period, and supporting cross-currency repo (including the Hong Kong dollar, US dollar, and euro).
According to HKMA, the measures aim to adopt international market best practices and enhance operational efficiency.
They will further expand the depth and breadth of the offshore repo market, improve the market-based mechanism for offshore RMB liquidity management, and broaden the use of onshore RMB bonds as collateral in the offshore market.
HKMA says bond collaterals can be re-used during the repo period in four specific use cases: for re-use in offshore repo transactions; as collateral for the HKMA鈥檚 RMB Liquidity Facility; as margin collateral at OTC Clearing Hong Kong (OTCC); and for cash bond trading through Northbound Bond Connect.
Participating institutions shall follow relevant policies and operational rules for the respective use cases when re-using the collateral.
For instance, if the collateral is re-used in a new offshore repo transaction during the repo period, the participating institution should follow the latest arrangements of offshore RMB repo business.
Regarding its move to support cross currency repo, HKMA says settlement in other currencies will be supported, with a view to facilitating participating institutions鈥� multi-currency funding activities by collateralising onshore RMB bond holdings.
Cheuk Wong, head of markets and 麻豆传媒 Services, Hong Kong at HSBC, says: 鈥淗SBC is pleased to embrace this latest wave of Bond Connect measures which reinforce Hong Kong鈥檚 dominant role as the gateway to the mainland鈥檚 capital markets.
鈥淭he enhancements to the offshore RMB bond repurchase business is expected to enrich liquidity management in Hong Kong. HSBC will facilitate offshore investors to use the cross-currency repo with settlement options in Hong Kong dollars, US dollars, and euros, alongside the offshore RMB as funding currencies against onshore RMB bonds as collateral.鈥�
Wong believes the enhancements, among others recently announced, should support greater global investor allocations toward the world's second-largest fixed income market.
Additionally, as the scope of investors under the Southbound Bond Connect is set to expand, HSBC will look to cater solutions to a wider range of mainland non-bank financial institutions 鈥� such as insurance and securities firms.
Facilitating the participation of Northbound Bond Connect investors in the repo business, the authority welcomes two enhancements which will come into effect on 25 August 2025.
These are supporting the rehypothecation of bond collaterals during the repo period, and supporting cross-currency repo (including the Hong Kong dollar, US dollar, and euro).
According to HKMA, the measures aim to adopt international market best practices and enhance operational efficiency.
They will further expand the depth and breadth of the offshore repo market, improve the market-based mechanism for offshore RMB liquidity management, and broaden the use of onshore RMB bonds as collateral in the offshore market.
HKMA says bond collaterals can be re-used during the repo period in four specific use cases: for re-use in offshore repo transactions; as collateral for the HKMA鈥檚 RMB Liquidity Facility; as margin collateral at OTC Clearing Hong Kong (OTCC); and for cash bond trading through Northbound Bond Connect.
Participating institutions shall follow relevant policies and operational rules for the respective use cases when re-using the collateral.
For instance, if the collateral is re-used in a new offshore repo transaction during the repo period, the participating institution should follow the latest arrangements of offshore RMB repo business.
Regarding its move to support cross currency repo, HKMA says settlement in other currencies will be supported, with a view to facilitating participating institutions鈥� multi-currency funding activities by collateralising onshore RMB bond holdings.
Cheuk Wong, head of markets and 麻豆传媒 Services, Hong Kong at HSBC, says: 鈥淗SBC is pleased to embrace this latest wave of Bond Connect measures which reinforce Hong Kong鈥檚 dominant role as the gateway to the mainland鈥檚 capital markets.
鈥淭he enhancements to the offshore RMB bond repurchase business is expected to enrich liquidity management in Hong Kong. HSBC will facilitate offshore investors to use the cross-currency repo with settlement options in Hong Kong dollars, US dollars, and euros, alongside the offshore RMB as funding currencies against onshore RMB bonds as collateral.鈥�
Wong believes the enhancements, among others recently announced, should support greater global investor allocations toward the world's second-largest fixed income market.
Additionally, as the scope of investors under the Southbound Bond Connect is set to expand, HSBC will look to cater solutions to a wider range of mainland non-bank financial institutions 鈥� such as insurance and securities firms.
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