Title: Hong Kong Monetary Authority to Include Bond Connect as Eligible Collateral for RMB Liquidity Arrangements
On January 24, the People’s Bank of China and the Hong Kong Monetary Authority announced a series of measures aimed at deepening financial cooperation between the mainland and Hong Kong. One of the key measures includes the inclusion of Bond Connect as eligible collateral for RMB liquidity arrangements, which will take effect on February 26.
During the Asian Financial Forum in Hong Kong on the same day, Hong Kong Monetary Authority President Yu Weiwen shared the news with the media. The Bond Connect inclusion is part of the broader effort to optimize the pilot implementation of the “Cross-border Wealth Management Connect” business in the Greater Bay Area and to facilitate payment arrangements for Hong Kong and Macao residents purchasing property in the region.
The new measure aims to develop and strengthen the function of mainland bonds as collateral, making it easier for international investors to liquidate their bond positions and attract them to continue investing. Additionally, the RMB liquidity arrangement of the Hong Kong Monetary Authority will be used as a pilot project, allowing investors to use mainland government bonds or policy financial bonds purchased through Northbound Trading as qualified collateral to obtain RMB funds. This marks the first time that onshore bonds have been officially established in the offshore market as collateral.
The move is expected to have a positive impact on the bond market and attract more international investors to participate in the Chinese market. It aligns with the broader goal of deepening financial cooperation between mainland China and Hong Kong, as outlined in the recent measures announced by the People’s Bank of China and the Hong Kong Monetary Authority.
The implementation of Bond Connect as eligible collateral for RMB liquidity arrangements represents a significant step forward in enhancing financial connectivity between mainland China and Hong Kong, and is expected to further bolster the bond market and attract international investors.