Launch of cross-boundary bond repurchase business

The cross-boundary bond repurchase (repo) business, jointly advocated by the Hong Kong Monetary Authority (HKMA), the People’s Bank of China (PBoC), the China Securities Regulatory Commission, and the State Administration of Foreign Exchange was officially launched today (26 September).

Relevant Mainland financial authorities/regulators jointly issued the “Notice to Further Supporting Overseas Institutional Investors in Conducting Bond Repo Business in China’s Bond Market” today. Under this policy measure, all overseas institutional investors already investing in the onshore bond market, including Bond Connect investors, will be allowed to participate in the onshore repo business and to remit the RMB liquidity thus obtained for offshore use.  This measure is another important policy initiative following the launch of the offshore RMB repo business by the HKMA in February this year. It will provide more stable liquidity support for Hong Kong’s offshore RMB market, and effectively lower the RMB funding cost.  The cross-boundary repo and offshore RMB repo businesses will complement each other in addressing offshore investors’ needs of asset allocation and liquidity management. It will help activate offshore investors’ onshore bond holdings and further enhance the attractiveness of onshore bonds, thereby promoting the use of RMB as an investment and funding currency in the international markets.

Mr Eddie Yue, Chief Executive of the HKMA, said, “We are pleased to launch the cross-boundary repo business. This is one of the key initiatives on which the HKMA and the PBoC have been working closely, to continuously enhance the Bond Connect business. This measure will bolster offshore RMB liquidity in Hong Kong, increase overseas investors’ interest in allocating to RMB assets, and promote more diversified development of offshore RMB businesses. This in turn will help consolidate and enhance Hong Kong’s status as an international financial centre and an offshore RMB business hub.”