The Hong Kong Monetary Authority (HKMA) has announced an arrangement that will allow Northbound Bond Connect participants to conduct offshore renminbi (RMB) bond repurchase (repo) transactions in Hong Kong using their Bond Connect-held onshore bonds as collateral, with the business scheduled to commence soon. All existing Northbound Bond Connect investors can participate, including Central Moneymarkets Unit (CMU) members and offshore investors using CMU sub-accounts via Hong Kong custodian banks that are CMU members. Eligible collateral covers bonds held under Northbound Bond Connect regardless of bond type. In the initial phase, 11 HKMA-designated Primary Liquidity Providers will act as market makers, and each repo transaction must include at least one of them as a counterparty. Participants may use their preferred master repo documentation (including Global Master Repurchase Agreement or National Association of Financial Market Institutional Investors templates), and transactions may be executed bilaterally OTC, via existing Bond Connect linkages between onshore and offshore central securities depositories, or through onshore or offshore electronic trading platforms. Settlement will be completed under the CMU Repo Service, with initial leverage limits implemented by transferring bond ownership to the repo buyer while prohibiting re-use of the bonds during the repo period through CMU locking and management. Market makers must report same-day transaction data to the HKMA for monitoring, with reporting requirements and submission channels to be finalised. CMU will publish further operational details on bond transfer and settlement, and the HKMA will review post-launch experience and adjust the arrangement as needed.

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