HKMA arranges offshore RMB bond repo business
13 January 2025 Hong Kong
Image: Iakov_Kalinin/stock.adobe.com
The Hong Kong Monetary Authority (HKMA) has revealed its plans for an offshore renminbi bond repurchase business.
Through this move, the institution aims to enhance the market-based offshore RMB liquidity management and increase Hong Kong鈥檚 competitiveness as an offshore RMB business hub.
Under the offshore repo arrangement, Northbound Bond Connect participants can use eligible onshore bonds as collateral to conduct RMB repo business in Hong Kong.
The participants include all existing Northbound Bond Connect investors, including Central Moneymarkets Unit (CMU) members and offshore investors with CMU sub-accounts opened through Hong Kong custodian banks that are CMU members.
All bonds held by participating institutions under Northbound Bond Connect, regardless of bond type, will be eligible.
In the initial stage, each repo transaction will have to involve at least one of 11 primary liquidity providers designated by the HKMA as market makers.
Participants may choose their own repo agreement template, such as the Global Master Repurchase Agreement (GMRA) or the National Association of Financial Market Institutional Investors (NAFMII)鈥檚 Bond Repurchase Master Agreement.
Transactions may be conducted bilaterally over-the-counter, through an electronic trading platform, or in the same manner as existing Northbound Bond Connect transactions, and via the linkage between the Central 色花堂Depositories (CSDs) in the onshore and offshore markets.
Settlement will be completed under the Repo Service by CMU.
This announcement comes as part of new policy measures introduced by the HKMA and the People's Bank of China, with the aim to deepen the financial market connectivity between the two entities.
According to the HKMA, the business is scheduled to commence soon, but no concrete date was given in the announcement.
Through this move, the institution aims to enhance the market-based offshore RMB liquidity management and increase Hong Kong鈥檚 competitiveness as an offshore RMB business hub.
Under the offshore repo arrangement, Northbound Bond Connect participants can use eligible onshore bonds as collateral to conduct RMB repo business in Hong Kong.
The participants include all existing Northbound Bond Connect investors, including Central Moneymarkets Unit (CMU) members and offshore investors with CMU sub-accounts opened through Hong Kong custodian banks that are CMU members.
All bonds held by participating institutions under Northbound Bond Connect, regardless of bond type, will be eligible.
In the initial stage, each repo transaction will have to involve at least one of 11 primary liquidity providers designated by the HKMA as market makers.
Participants may choose their own repo agreement template, such as the Global Master Repurchase Agreement (GMRA) or the National Association of Financial Market Institutional Investors (NAFMII)鈥檚 Bond Repurchase Master Agreement.
Transactions may be conducted bilaterally over-the-counter, through an electronic trading platform, or in the same manner as existing Northbound Bond Connect transactions, and via the linkage between the Central 色花堂Depositories (CSDs) in the onshore and offshore markets.
Settlement will be completed under the Repo Service by CMU.
This announcement comes as part of new policy measures introduced by the HKMA and the People's Bank of China, with the aim to deepen the financial market connectivity between the two entities.
According to the HKMA, the business is scheduled to commence soon, but no concrete date was given in the announcement.
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