A Breakthrough in Bond Connect Service

The Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBoC) have announced new policy measures today, January 13, aimed at enhancing financial market connectivity between Hong Kong and the Mainland. These measures will further solidify Hong Kong's position as the global hub for offshore RMB business. Among the highlights, the Central Moneymarkets Unit (CMU) is particularly pleased to see significant advancements in Bond Connect services for both Northbound and Southbound transactions. Building on the smooth operation of Southbound Bond Connect, the HKMA and the PBoC will jointly implement a series of enhancement and expansion measures, including:

• Extending the settlement time under the Central Securities Depositories (CSDs) linkage;
• Supporting the settlement of multi-currency bonds in RMB, Hong Kong dollar, US dollar and euro through the CSDs linkage; and
• Further out, expanding the scope of eligible Mainland investors in due course.

These measures will further broaden the overseas investment channels for Mainland institutional investors, address their needs for diversified asset allocation, and improve transaction and settlement efficiency. They will also bolster the development of the Hong Kong bond market, particularly the Dim Sum bond market.
  The HKMA supports developing offshore RMB repo business using Northbound Bond Connect bonds as collateral, with a view to establishing a market-based arrangement for offshore RMB liquidity management that will enhance Hong Kong’s competitiveness as an offshore RMB business hub. This business will be launched soon. For more details, please refer to the HKMA press release. The HKMA, the PBoC, and the Securities and Futures Commission have reached consensus to support offshore investors to use onshore bonds issued by the Ministry of Finance and Mainland policy banks that are held under Northbound Bond Connect as eligible margin collateral for derivative transactions at the OTCC. Further details will be announced in due course.