Swap Connect On Its Way

Background

Overseas investors' participation in the China Inter-bank Bond Market (CIBM) has been steadily increasing in recent years due to the implementation of various opening-up regimes that allow access to the CIBM, such as the CIBM Direct, Bond Connect and QFI regimes, and the inclusion of China bonds in major international indices. At the end of 2021, overseas investors held RMB bonds of RMB 4 trillion, accounting for about 3.5% of the total market size of the CIBM.

On 4 July 2022, the People's Bank of China (PBoC), the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) released a joint announcement¹ (the "Joint Announcement") on the Swap Connect (the "Swap Connect"), which is intended to meet the increasing demands of overseas investors to manage interest rate risk that arises from their bond holdings in the CIBM. The Swap Connect will promote the development of mutual access between the Hong Kong and Mainland interest rate