OTC Clear to accept China government bonds as collateral for Swap Connect
17 December 2024 Hong Kong
Image: Kapi/stock.adobe.com
Offshore investors will be able to use China government bonds and policy bank bonds held through Bond Connect as collateral for Northbound Swap Connect, says OTC Clearing, a clearing subsidiary of Hong Kong Exchanges and Clearing (HKEX).
The CCP’s decision will take effect from 13 January 2025, and will allow the new eligible collateral to cover initial margin requirements of Northbound Swap Connect.
The exchange group believes this will provide greater flexibility to international investors and enhance their capital efficiency.
“It will also help vitalise international investors' bond holdings in the China Interbank Bond Market, promoting the internationalisation of the RMB,” HKEX says.
Swap Connect, which links Hong Kong and China interbank interest rate swap markets, has seen “steady growth” in trading volume since its launch in May 2023.
The average daily turnover of Swap Connect totalled 18.2 billion renminbi (US$2.4 billion) in November 2024, up from RMB 3 billion in May 2023.
The CCP’s decision will take effect from 13 January 2025, and will allow the new eligible collateral to cover initial margin requirements of Northbound Swap Connect.
The exchange group believes this will provide greater flexibility to international investors and enhance their capital efficiency.
“It will also help vitalise international investors' bond holdings in the China Interbank Bond Market, promoting the internationalisation of the RMB,” HKEX says.
Swap Connect, which links Hong Kong and China interbank interest rate swap markets, has seen “steady growth” in trading volume since its launch in May 2023.
The average daily turnover of Swap Connect totalled 18.2 billion renminbi (US$2.4 billion) in November 2024, up from RMB 3 billion in May 2023.
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