Core Insights - The People's Bank of China reported that as of September 2025, foreign institutions held 3.78 trillion yuan in the interbank bond market, accounting for 2.2% of the total custody volume [1] - The report indicates a significant increase in the number of foreign institutions entering the market, with 11 out of 15 new entrants in the third quarter joining in September [3] - A new policy allowing foreign investors to engage in bond repurchase transactions was introduced, enhancing the openness of the bond market and improving liquidity [6][8] Group 1: Foreign Investment in Bond Market - As of September 2025, foreign institutions held 2.00 trillion yuan in government bonds, 0.86 trillion yuan in interbank certificates of deposit, and 0.77 trillion yuan in policy financial bonds [1][3] - The number of foreign institutions participating in the interbank bond market reached 1,176, with 612 entering through settlement agency channels and 837 through the "Bond Connect" [1] - In September, the trading volume of foreign institutions in the interbank bond market was approximately 0.96 trillion yuan, with an average daily trading volume of about 41.7 billion yuan [1] Group 2: Market Dynamics and Trends - The trading volume of foreign institutions in September showed a slight decline to 0.83 trillion yuan from 0.87 trillion yuan in August, indicating a limited contraction in overall scale [3] - Commercial banks maintained a dominant position in the bond market, with a trading scale of 24.46 trillion yuan in September, while securities companies saw a decrease in trading volume [5] - The introduction of the bond repurchase business is expected to attract more foreign capital into the domestic market, enhancing the efficiency of RMB bond assets [8][9] Group 3: Impact of New Policies - The new policy allows foreign institutions to conduct bond repurchase transactions, which is expected to reduce transaction friction and enhance the willingness of foreign institutions to hold bonds [8] - The repurchase mechanism is anticipated to increase trading volume in the short term and promote a transition from scale expansion to mechanism maturity in the domestic bond market [9] - The diversification of participants in the market is expected to lead to more trading strategies and reduce market risk concentration [8][9]

Core Insights - The "Bond Connect" program has achieved significant success since its launch seven years ago, facilitating the internationalization of China's financial market [1][2][3] Group 1: Performance and Impact - The average daily trading volume of the "Northbound Connect" has grown at an annual rate of 63%, with nearly 60% of foreign investors' transactions in Chinese bonds conducted through this channel [2] - In the past year, the "Swap Connect" has attracted 61 foreign institutions, resulting in over 4,300 transactions with a total nominal principal amount of approximately 2.2 trillion RMB [2] - Last year, international investors' total trading volume in mainland bonds exceeded 15 trillion RMB, with about two-thirds executed via "Bond Connect" [2] Group 2: Future Developments - The People's Bank of China plans to launch a new service allowing foreign institutions to use "Bond Connect" for paying "Swap Connect" margin, which will enhance the application of RMB bonds as offshore collateral [5] - Ongoing research aims to improve the openness of the bond market and enhance cross-border investment facilitation, including refining the "Bond Connect" and "Swap Connect" mechanisms [5] - The Hong Kong Stock Exchange is preparing to introduce a 10-year government bond futures product to help international investors manage RMB asset interest rate risks [6] Group 3: Regulatory and Market Integration - The Hong Kong Monetary Authority emphasizes the need for continued expansion of bond issuance in Hong Kong to enhance the offshore RMB bond market [7] - Future measures may include the introduction of government bond futures and bank bond repurchase agreements to meet diverse trading strategy needs of foreign investors [7]