Citi is now a primary liquidity provider for the enhanced offshore RMB bond repurchase (repo) scheme run by the Hong Kong Monetary Authority (HKMA) and the People’s Bank of China (PBOC).
It is the only US bank of the 11 dealers on the scheme.
The Northbound repo connect programme was launched in February, and allows eligible offshore investors to engage in repo transactions using mainland China interbank bonds, held by Northbound Bond Connect.
In July, HKMA announced that its offshore RMB repo business would be enhanced to allow for the rehypothecation of bond collaterals and cross-currency repo. The adjustments went live on 25 August and have, the authority said, been well received by the market. On the first day of trading, over RMB 3 billion was transacted in various settlement currencies across more than 60 transactions.
Citi noted increased interest from local and international clients since the update.
Paul Smith, APAC head of markets at Citi, commented, “The new feature from HKMA provides greater flexibility and aligns with global repo market standards. This enhancement reinforces Hong Kong’s unique role as a key connector between mainland China and international markets.”
“The HKMA will continue working with Mainland authorities and the industry to promote offshore RMB repo business, and create more policy headroom and an enabling environment for the development of Hong Kong’s offshore RMB market,” the authority concluded.
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