The Macau Monetary Authority (AMCM) – the special administrative region’s financial regulator – says that it has “optimised” Macau’s bond repurchase business*, including the launch of a specialised yuan swap facility.
The optimised bond repurchase measures started on Friday.
An AMCM statement on Friday said that based on the recent expansion of the bilateral currency swap** agreement between the People’s Bank of China (PBOC) and AMCM to 50 billion yuan or 57 billion patacas, AMCM has launched an “optimised” bond repurchase and a specialised yuan swap facility, with the aim of fully leveraging the central government’s policy support for Macau and promoting the local financial sector’s effective use of the city’s currency swap mechanism and fund management tools, thereby optimising their liquidity management.
AMCM signed a yuan-pataca swap agreement with PBOC – the nation’s central bank – in December 2019, with a scale of 30 billion yuan or 34 billion patacas and a validity of three years, after which the agreement was renewed in December 2022, with the scale and validity unchanged.
In December last year, PBOC renewed the agreement with AMCM, upgrading it to a standing arrangement with indefinite validity and expanding the swap facility to 50 billion yuan or 57 billion patacas.
Friday’s statement noted that AMCM launched Macau’s bond repurchase business in early 2023, allowing the provision of liquidity in patacas and yuan to local banks, with eligible bonds used as the subject of repurchase.
The statement said that with the aim of supporting the development of the local money market and bond market, AMCM decided to launch yuan funding facilities with a relatively longer tenor for its bond repurchase business.
According to the statement, the optimised bond repurchase measures launched on Friday also include one allowing local banks to use eligible bonds transacted under the direct linkage between the Macau’s Central Securities Depository (CSD) and Hong Kong’s Central Moneymarkets Unit (CMU) to conduct repurchase operations, further enhancing the synergistic effects of the collaborative development between the two cities’ bond markets.
Moreover, the statement said, with the aim of diversifying the channels for local banks to obtain yuan funds, AMCM has also launched a specialised yuan swap facility denominated in HK dollars or US dollars, which, the statement said, can enhance liquidity in Macau’s offshore yuan market and promote the stable development of yuan-related businesses in the local financial market.
AMCM also pledged in the statement that it will continue to conduct money market operations through various financial instruments with the aim of maintaining the stability of Macau’s monetary and financial system and advancing the high-quality development of the city’s modern financial sector.
* A bond repurchase is fundamentally a short-term collateralised loan, not a permanent sale of securities. In this transaction, one party, typically a dealer or hedge fund needing cash, sells bonds to another party, like a money market fund, with an agreement to repurchase them at a specified future date and price. The difference between the initial sale price and the higher repurchase price effectively constitutes the interest on the loan. This mechanism provides crucial short-term liquidity to financial markets, allowing institutions to fund their positions while enabling cash-rich entities to earn a return on secure, collateralised investments. Consequently, the repurchase market is a vital pillar of the global financial system, serving as a key tool for central banks in implementing monetary policy and for market participants in managing daily liquidity. – DeepSeek
** A currency swap is a financial agreement between two parties to exchange principal and interest payments in different currencies over a set period. It allows entities, like corporations or governments, to obtain other currency financing at more favourable rates and to hedge against exchange rate risk. This tool is crucial for managing cross-boundary debt obligations and supporting cross-border investment and trade. – DeepSeek
This file photo taken last year shows the AMCM headquarters on Guia Hill. – Photo: Tony Wong
This poster provided by the Macau Monetary Authority (AMCM) explains its “optimised” bond repurchase.
