The yield curve fell for all maturities between end-December and 15 March, except for the 15-year tenor. The 5-year tenor declined the most, falling 28 bps, followed by the 7-year tenor, which fell 23 bps. Yields on the 10-year maturity fell only 2 bps while the 15-year tenor rose by 0.2 bps. For tenors of less than 5 years, yields fell an average of 11 bps.

The size of Hong Kong, China’s local currency (LCY) bond market grew 3.1% y-o-y to HKD1.3 trillion (US$168.5 billion) as of end-December. However, on a quarter-on-quarter (q-o-q) basis, LCY bonds outstanding fell 0.9%, driven by a fall in corporate bonds outstanding. Total LCY government bonds outstanding rose 3.9% y-o-y as of end-December, while q-o-q growth was 0.9%. The amount of LCY government bonds outstanding at end-December reached HKD703 billion. The size of LCY corporate bonds outstanding fell to HKD605 reflecting growth of 2.2% y-o-y and a decline of 2.8%  q-o-q.

On 13 March, HKMA, Bank Negara Malaysia (BNM), and Euroclear Bank jointly announced the launch of a pilot program allowing for cross-border investment and settlement of debt securities. Through the pilot platform, investors in Hong Kong, China and Malaysia can buy and hold the LCY debt securities of each country on a delivery-versus-payment (DVP) basis.