China Opens New Channel Giving Access to $3 Trillion Swap Market

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China has set a 20 billion yuan daily limit for net trading under Swap Connect, and eligible instruments include swaps referencing the seven-day fixing repurchase rate, and the three-month and overnight Shanghai Interbank Offered Rate. Photo: Bloomberg

(Bloomberg) — Global investors seeking to trade China’s reopening will have a new strategic tool from Monday: onshore interest-rate swaps that had an annual turnover of $3 trillion last year.

The so-called Swap Connect program between the Chinese mainland and Hong Kong will provide overseas funds with easier access to the derivatives that will help hedge their exposure to the world’s second-biggest bond market. The scheme will also enable them to bet on key money-market rates that are sensitive to China’s monetary policy.