On Monday, Hong Kong Exchanges and Clearing Limited (HKEX) revealed that its clearing subsidiary, OTC Clearing Hong Kong Limited (OTC Clear), will start accepting China Government Bonds and Policy Bank Bonds as collateral for Northbound Swap Connect from January 13, 2025.
HKEX’s OTC Clear to Accept China Government Bonds and Policy Bank Bonds as Collateral for Swap Connect
The firm said the enhancement will let offshore investors use these bonds, which are held through Bond Connect, to meet initial margin requirements for Northbound Swap Connect.
It is expected to improve capital efficiency and provide more flexibility to international investors. Furthermore, HKEX said that it will also enhance the liquidity of bond holdings in the China Interbank Bond Market.
Swap Connect was launched in May 2023. It links the Hong Kong and Mainland China interbank interest rate swap markets, with HKEX stating it fosters stronger regional financial integration.
The firm added that since its inception, the platform has seen steady growth.
As of November 2024, 71 overseas institutions are said to have participated in Northbound Swap Connect.
Meanwhile, the average daily turnover reportedly surged to RMB 18.2 billion in November, compared to RMB 3 billion in May 2023.
HKEX also believes the development will further promote the internationalisation of the RMB by providing offshore investors with more tools to manage their exposures.
