OTC Clear to accept China government, policy bank bonds as collateral for all derivatives

Hong Kong Exchanges and Clearing (0388) said its clearing subsidiary OTC Clearing Hong Kong will start accepting Chinese government bonds and policy bank bonds held by international investors through Bond Connect as margin collateral for all derivative transactions from Friday.

Since January, these bonds have already been permitted for use to cover initial margin requirements for Northbound Swap Connect transactions, HKEX said in a statement on Wednesday. 

HKEX head of platform & market structure development Glenda So Ying-ying said the initiative will provide greater flexibility to international investors and improve their capital efficiency, further enhancing the attractiveness of yuan-denominated assets and promoting the internationalization of the Chinese currency. 

OTC Clearing provides clearing services for interest rate swaps, including China onshore interest rate swaps via Swap Connect, non-deliverable currency forwards, cross-currency swaps and deliverable FX.

STAFF REPORTER