The Hong Kong Monetary Authority (HKMA) has announced enhancements to the offshore RMB bond repurchase (repo) business, including supporting the rehypothecation of bond collaterals during the repo period.

In consultation with relevant Mainland authorities and taking into account industry feedback, the HKMA will allow rehypothecation of bond collateral during the repo period, bringing this into alignment with international market practice. The enhancement will facilitate more efficient use of collaterals, reduce the financing costs for market participants, and enhance the efficiency of liquidity management.

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Bond collaterals can be re-used during the repo period in four specific use cases: for re-use in offshore repo transactions; as collateral for the HKMA's RMB Liquidity Facility; as margin collateral at OTC Clearing Hong Kong Limited (OTCC); and for cash bond trading through Northbound Bond Connect.

With the enhancement, settlement in other currencies (including HKD, USD, and EUR) will also be supported, with a view to facilitating participating institutions' multi-currency funding activities by collateralizing onshore RMB bond holdings, enriching their liquidity management tools, and hence increasing the attractiveness of onshore bonds.

The above arrangements will be officially launched on August 25, 2025.

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