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CMU to give debt market substance

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NEWS of the launch of the Hong Kong Monetary Authority's Central Moneymarkets Unit Service (CMU Service) for Hong Kong dollar debt is a significant and encouraging development in giving the local debt market new substance.

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The creation of such a clearing system is fundamental. Trying to develop a mature debt market without one is like eating a nut loaf without the nuts.

CMU Service will perform the role of a central custodian and clearing agent for Hong Kong dollar debt instruments issued by private sector issuers.

It is intended to develop this market by providing an efficient clearing system for debt instruments which can reduce transaction costs as well as settlement risk.

Observers might note it was only 18 months ago that such a central clearing system, with continuous net settlement, was launched in share trading.

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According to the monetary authority, the amount outstanding in Exchange Fund bills, notes and government bonds comes to $31.4 billion.

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