HKEX: By May 2025, the trading volume of interbank swaps is expected to account for about 8% of the domestic interest rate swap market in China.

On July 7th, HKEX issued a statement saying that since the launch of Bond Connect in 2023, it has been continuously optimized and the trading volume has been increasing. When Bond Connect was launched two years ago, there were only 22 offshore investors participating. By the first quarter of 2025, the number of participating investors had increased to over 80. The monthly trading volume has increased from 500 billion RMB in May 2023 to 3.8 trillion RMB in May 2025, with a daily average settlement amount reaching 250 billion RMB, far exceeding the initial expectations. As of May 2025, the trading volume of Bond Connect accounted for about 8% of the onshore interest rate swap product market in China. In January of this year, the eligible collateral for Northbound Bond Connect was expanded to include onshore government bonds and policy financial bonds as qualified performance collateral. This measure increased the flexibility of the collateral for Northbound Bond Connect, further facilitating investors to invest in onshore RMB bonds. Investors can improve capital efficiency and adopt more diversified investment strategies. Last week, Bond Connect introduced new optimization measures - extending the maximum remaining term of interest rate swap contracts under Northbound Bond Connect from 10 years to 30 years. HKEX mentioned that the various optimization measures of Bond Connect can help investors build more comprehensive investment portfolios. According to statistics from the People's Bank of China, as of April 2025, the total value of onshore fixed income products held by international investors reached 4.4 trillion RMB, an increase of 10% from a year ago. This optimization allows investors to strengthen their investment portfolios and product selection. Investors can more effectively manage their holdings of interest rate swap products through Bond Connect's contract compression service, simplify their investment portfolios, reduce funding costs, and operating costs. At the same time, as Bond Connect becomes more convenient, with more participating investors, the network effect helps improve market liquidity, narrow spreads, ultimately promote product innovation, and strengthen market confidence. The steady increase in trading volume of Bond Connect reflects this. In addition to extending the term of interest rate swap contracts on Northbound Bond Connect to 30 years, Bond Connect will also expand the types of products later this year, adding interest rate swap contracts based on the one-year loan prime rate (LPR 1Y) as the reference rate. It is believed that other optimization measures will be introduced in the future. HKEX stated that the continuous optimization and upgrade of Bond Connect over the past two years since its opening fully demonstrates the recognition and strong demand of international investors for this important investment channel. With the acceleration of the internationalization of the RMB, market demand is expected to grow. According to SWIFT's data, the global trade settlement in RMB now accounts for nearly 6%, surpassing the settlement in euros (5.3%). According to statistics from the People's Bank of China, in 2024, the cross-border RMB settlement between China and ASEAN countries exceeded 5.8 trillion RMB, more than twice the settlement amount in 2021.