Securities finance industry news | HSBC and BEA complete HKD repo trade using digital bond collateral

HSBC has conducted a HKD repo transaction using digital bonds as collateral.

The Hong Kong-based international bank executed the repo trade with The Bank of East Asia, with digital native green bonds issued by the Hong Kong government used as collateral to secure the transaction against transfer of HKD liquidity.

These digital bonds were issued on the HSBC Orion digital assets platform as part of a HKD 6 billion (US$760 million) equivalent digital native green bonds issuance by the Hong Kong Monetary Authority (HKMA) across HKD, CNH, USD and EUR currencies.

These bonds settled on 7 February and represented the largest digital bond issuance to be completed globally, according to the participants, as well as being the first multi-currency digital bond issue.

The HKMA’s Central Moneymarkets Unit (CMU) operates HSBC Orion in Hong Kong, supporting digital native bond issuance and settlement using CMU infrastructure.

John O’Neill, HSBC’s global head of digital assets strategy, says: “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.

“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.”

Bryan Wong, general manager and head of treasury markets division of BEA, comments: “Investing in Hong Kong’s first-ever digitally native bonds and transacting repo trades with the bonds as collateral has been a smooth process.

“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.”