Core Insights - The green bond market has significant growth potential, as evidenced by the Hong Kong SAR government's successful issuance of its third batch of digital green bonds totaling HKD 10 billion, setting a record for the largest digital bond issuance globally [1] - This issuance includes four currency types: Hong Kong Dollar, Renminbi, US Dollar, and Euro, with maturities ranging from 2 to 5 years, providing diverse investment options for various regional and investor types [1] - The offering received over HKD 130 billion in subscriptions, indicating an oversubscription of approximately 12 times, highlighting strong investor interest [1] - This issuance follows two successful digital green bond issuances in 2023 and 2024, marking another significant breakthrough in the Hong Kong SAR government's efforts to promote bond tokenization [1] - The experience gained from pioneering digital green bonds in Hong Kong is expected to guide the bond market's resources towards green bonds, potentially injecting new momentum into the credit bond market with future innovative products [1]

Core Viewpoint - The Hong Kong market is increasingly accepting native digital bonds, which may become a standard financing option for sovereign and high-quality corporate issuers due to improving legal and infrastructure frameworks and ongoing policy incentives [2][3]. Group 1: Digital Green Bond Issuance - The Hong Kong government successfully priced approximately HKD 10 billion worth of digital green bonds under its sustainable bond program, with total subscriptions exceeding HKD 130 billion, indicating a 12-fold oversubscription [2][3]. - The issuance includes bonds in multiple currencies: HKD, RMB, USD, and EUR, with specific interest rates for different maturities [3]. - This issuance is recognized as the largest digital bond issuance globally to date [2]. Group 2: Market Dynamics and Participation - The issuance reflects a significant increase in market participation, with more banks and first-time investors actively engaging in the digital bond market [4]. - Hong Kong is expected to issue over USD 84 billion in green and sustainable bonds in 2024, maintaining its position as the leading issuer in Asia for seven consecutive years, accounting for 45% of the regional total [4]. Group 3: Technological Innovations - The issuance utilized tokenized central bank currencies, laying the groundwork for integrating other forms of digital currencies and enhancing interoperability among different digital infrastructures [4][5]. - The digital bonds are issued in a native digital format, streamlining the issuance process and reducing settlement times and costs compared to traditional bonds [5][6]. Group 4: Future Developments and Initiatives - The Hong Kong government is promoting the normalization of digital bond issuance through initiatives like the "Digital Bond Subsidy Program" and exploring the tokenization of existing traditional bonds [6][7]. - There are ongoing efforts to innovate products related to green bonds, green funds, ESG ETFs, and GRWA (Green Real World Asset Tokenization) [7].

1. Report Industry Investment Rating - The report does not mention the industry investment rating. 2. Core View of the Report - Since the beginning of 2025, the offshore RMB bond market has continued to thrive in both supply and demand, and the annual issuance is expected to hit a new high. Driven by multiple factors and policy support, the offshore RMB bond market is facing new development opportunities [1]. 3. Summary According to Relevant Catalogs 3.1 Offshore RMB Bond Issuance - As of September 2, 2025, the issuance of offshore RMB bonds has reached a record high for the same period, exceeding RMB 550 billion, and the annual issuance is expected to exceed that of 2024 [2]. 3.2 Drivers of the Thriving Issuance - **Interest rate differential**: The inversion of Sino - US risk - free interest rates makes the RMB financing cost significantly lower than that of the US dollar. Since 2023, the US Treasury yield has been significantly higher than that of China, and although the spread has narrowed, it is still about 200 basis points, making RMB bond financing cheaper, especially for high - rating issuers [4]. - **Yield advantage**: The yield of offshore RMB bonds is higher than that of domestic bonds of the same issuer. Since 2023, the offshore yield of 3 - year Treasury bonds has been on average more than 30 basis points higher than the on - shore yield. After mid - May 2025, the spread narrowed to about 10 basis points. The credit spread of offshore RMB bonds is also generally higher, attracting domestic funds. The expansion of the Bond Connect's "Southbound Link" to non - banking institutions in July 2025 is conducive to attracting more domestic funds [6]. 3.3 Concentration of Issuing Entities - Chinese issuers dominate the offshore RMB bond issuance, accounting for about 60%. In the context of Sino - US interest rate differentials, many Chinese issuers choose to issue offshore RMB bonds for refinancing after the maturity of US dollar bonds [7]. - The issuance of urban investment bonds has increased significantly in the past two years, accounting for more than 30% in 2023 and 2024. The reasons include the rise in US dollar financing costs, the tightening of domestic urban investment bond issuance, and the increased market confidence in urban investment bonds [9][11]. 3.4 Favorable Factors for Market Development - **Financing cost advantage**: It is expected that the situation where the financing cost of offshore RMB bonds is lower than that of US dollar bonds will continue. Although the Fed may cut interest rates, the decline in US long - term bond yields may be limited, while the yield of RMB Treasury bonds still has room to decline [14]. - **Policy support**: The "Southbound Link" was expanded to non - banking institutions in July 2025, and the total quota is expected to be increased, which will increase the demand for offshore bonds and improve market activity [15]. - **Increased demand for non - US assets**: The implementation of the US "Big and Beautiful" Act has increased concerns about the unsustainability of US finances, and the market's demand for RMB assets is expected to rise [15]. - **Infrastructure improvement**: The Ministry of Finance has issued offshore Treasury bonds in Hong Kong for many years, optimizing the yield curve. The Hong Kong Stock Exchange is researching the launch of Chinese Treasury bond futures. The first tokenized offshore RMB public offering bond has been launched, enhancing issuance efficiency and bond liquidity [16].