HKEX Insight

In August 2026, HKEX launched 5-Year China Government Bond (CGB) Futures, the only CGB futures contract in the offshore market, giving international investors a way to hedge RMB interest rate risk using the same market infrastructure they already use for other derivatives in Hong Kong.

The launch tracks the RMB's widening global role. The currency is the world’s fifth most used currency for global payment as of July 2026, according to SWIFT, with the market share of RMB roughly doubling since early 2020.

That wider use has drawn international investors towards RMB-denominated assets, and they now hold a meaningful share of China's bond market, the world's second largest.

Foreign holdings of onshore bonds stood at about RMB3.2 trillion in June 2026, up from around RMB0.8 trillion when Bond Connect opened the market in 2017: international investors held roughly RMB2 trillion of CGBs at end-May 2026.

As holdings continue to grow, demand for offshore risk management tools has also increased. A range of risk management solutions has been introduced in stages: Bond Connect first provided a channel for bond trading, while Swap Connect, launched in 2023, subsequently added an over-the-counter tool for managing interest rate risk.

Now, HKEX's 5-Year CGB Futures widens the set by being the only CGB futures contract available in the offshore market, providing offshore investors with an effective tool to manage the duration and interest rate risks over Chinese Mainland bonds.  

With HKEX’s 5-Year CGB Futures being a cash-settled contract (traded and settled in RMB), it adopts a bond basket-based pricing methodology.

A reference yield is derived from a basket of eligible CGBs and then applied to a standardised virtual bond formula to determine the futures’ final settlement price, which will be provided by ChinaBond Pricing Center on the last trading day.

The bond basket is composed of the two most liquid CGBs, selected by trading turnover and will be readjusted as liquidity shifts. Building the reference from the most heavily traded bonds enables the contract to capture where market interest sits.

Each contract runs for no more than six months. For most of that time, an indicative basket applies and adjusts with the market, keeping the contract in step with market conditions. About a month before expiry the bond basket will be fixed, so investors can know for certain which bonds will be used to determine the final settlement price with it still being representative enough.

The effect is a contract that closely tracks the onshore five-year CGB yield, working as an effective hedge over RMB interest rate risks, while also providing an instrument allowing investors to gain CGB exposures in the offshore market.

The launch of CGB futures lands alongside a series of developments shaping how the offshore RMB rates market operates in Hong Kong.

On rates product development, FDR007 is targeted for inclusion as a Swap Connect reference rate in Q4 2026, aligning the cleared offshore swap curve with the onshore repo benchmark most widely used by domestic institutions.

On infrastructure development, HKEX and CFETS are developing an electronic bond trading platform connecting onshore trading with Hong Kong's international infrastructure. And on collateral development, Bond Connect securities are being progressively accepted as non-cash collateral across HKEX clearing houses.

Each of these developments is a step toward an offshore RMB rates market where access, risk management and collateral efficiency operate through a single, coherent infrastructure.

As these measures are gradually implemented, investors will be able to gain exposure to the Chinese Mainland's fixed income market more efficiently through Hong Kong. Following the launch of the CGB futures in August, Hong Kong will further reinforce its position as a leading offshore RMB interest rate risk management hub.

And as the world's leading offshore RMB center, Hong Kong will continue to broaden its product offering and risk management toolkit, thereby strengthening investor confidence in holding RMB assets outside of the Chinese Mainland.

The progress of RMB internationalisation is expected to gain further momentum as the RMB market continues to deepen and evolve, supported by HKEX's 5-Year CGB Futures as a key enabler of this development.