HSBC has executed a Hong Kong dollar repo transaction with the Bank of East Asia (BEA), which used Hong Kong government digitally native green bonds as collateral for financing purposes.
The move represents the first repo in Hong Kong involving digital bonds.
“Investing in Hong Kong’s first-ever digitally native bonds and transacting repo trades with the bonds as collateral has been a smooth process,” said Bryan Wong, general manager and head of treasury markets division of BEA.
“This repo transaction marks a significant milestone in building liquidity for digital bonds, while reinforcing our bank’s support for the development of Hong Kong dollar capital markets.”
Using HSBC Orion as the digital assets platform, HSBC helped the Hong Kong Monetary Authority (HKMA) complete a HKD6 billion-equivalent digitally native green bond issuance for the Hong Kong government across four currencies: HKD, CNH USD and EUR.
According to the bank, this was the largest digital bond issuance globally, alongside being the first multi-currency digital bond issuance. The bonds settled on 7 February.
In Hong Kong, the HKMA’s Central Moneymarkets Unit (CMU) operates HSBC Orion, which allows digitally native bond issuance and settlement through CMU’s infrastructure – expanding the global investor base via the CMU’s connections to other international central securities depositories, which also helps drive market liquidity for new digital bonds.
“The four digital bonds – recently issued by the Hong Kong government on HSBC Orion as part of the CMU’s infrastructure – have seen unprecedented investor demand, secondary trading, and now repo trading,” said John O’Neill, global head of digital assets strategy at HSBC.
“Digital bonds should be as liquid as conventional bonds, and HSBC is proud to have been part of the first multi-currency digital bond transaction globally to achieve this standard.”
In November last year, Abu Dhabi Securities Exchange (ADX) and HSBC Bank Middle East collaborated to develop digital fixed income securities, with the aim to broaden capital market use cases in the Middle East.
The collaboration leverages ADX’s investment product knowledge and HSBC’s investment banking, capital markets and blockchain capabilities.