To promote the development of Hong Kong's offshore RMB market, HKEX on Monday launched 5-year China treasury bond futures contracts, marking the world's first onshore treasury bond futures contract to be listed in an offshore market.
Hong Kong Financial Secretary Paul Chan stated that the launch of Swap Connect three years ago enabled overseas investors to more conveniently manage RMB interest rate risk. The treasury bond futures launched on Monday provide standardized, exchange-traded, tradable, and price-marked offshore hedging tools for Chinese treasury bonds.
Chan continued that both Swap Connect and treasury bond futures help make the risk management system for offshore RMB fixed income products more comprehensive. He believes that geopolitics and an uncertain external market environment have further increased the demand of domestic and foreign investors to hold RMB assets for the long term. Bond Connect has become the main channel for overseas investors to access the mainland bond market, accounting for about two-thirds of total trading volume. As of the end of June this year, the size of Chinese bonds held by overseas investors via this channel has exceeded RMB 3 trillion (about MYR 1.82 trillion), almost three times larger than when Bond Connect was launched nine years ago.
As a core RMB bond market maker in the offshore market, Bank of China (Hong Kong) launched the 5-year China treasury bond futures contract and successfully completed multiple trades covering all contract months on the first day.
Zhang Chengdong, Bank of China (Hong Kong) Head of Global Markets Trading & Deputy General Manager, said yesterday that treasury bond futures, as standardized on-exchange duration risk management tools, are complementary to the over-the-counter 'Swap Connect.' He added that the 5-year term helps overseas investors more precisely manage interest rate risks of medium-term RMB bonds, making the risk management system even more complete.
Zhang further noted that since the launch of Northbound Bond Connect in 2017, the size of onshore interbank bonds held by overseas institutions has grown more than fourfold, to RMB 3.2 trillion (about MYR 1.94 trillion) as of June this year, and the average monthly clearing volume of Swap Connect has continued to rise. The increasingly robust market foundation has laid solid groundwork for the launch of treasury bond futures.
HSBC also stated that it assisted clients in completing the first batch of 5-year treasury bond futures transactions in Hong Kong yesterday, actively supporting market innovation as a liquidity provider on the first day of contract launch.
The listing ceremony for treasury bond futures was held on Monday, attended by China Securities Regulatory Commission Chairman Wu Qing, Director of the Liaison Office of the Central People's Government in the Hong Kong Special Administrative Region Zhou Ji, SFC Chairman Huang Tianyou, and SFC CEO Leung Fung-yee.