Bank of China (Hong Kong) on Monday (October 12) completed Hong Kong's first cross-currency swap of offshore renminbi (CNH) fixed rate/US dollar secured overnight financing rate (SOFR) and first cross-currency swap of CNH fixed rate/Hong Kong dollar HKD overnight index average (HONIA) with another financial institution. Each of the two swaps carries a nominal value of 100 million yuan (US$14.9 million) with a one-year term.

Tony Wang, general manager of global markets at BOCHK, notes that as alternate reference rates (ARRs) to interest rate benchmarks, the SOFR and HONIA are becoming the new benchmarks in the global capital and derivatives markets.

“The introduction of CNH fixed rate against the ARR cross-currency swap will offer a new derivative product and hedging instrument for institutional and corporate customers to manage their interest rate risk during the transition,” Wang notes. “BOCHK is pleased to participate in the first cross-currency swaps of CNH fixed rate/USD SOFR and CNH fixed rate/HKD HONIA. These transactions represent a key milestone in the development of the Hong Kong derivatives market."

In July, the bank participated in the first centrally cleared HONIA interest rate swap contract settled by OTC Clearing Hong Kong Limited under the Hong Kong Exchanges and Clearing. HONIA is the alternative reference rate to the Hong Kong Interbank Offered Rate.