HKEx applies deeper haircuts on US T-bills used as collateral

Reuters

HONG KONG, Oct 10 (Reuters) - Hong Kong Exchanges & Clearing(HKEx) will apply a deeper discount on U.S. Treasuries used asmargin collateral, according to a circular from the clearinghouse effective from Thursday.

While the circular did not give a reason for the change, agovernment shutdown in the United States has raised concernsabout the outcome of talks to raise the debt ceiling there andprevent a default on U.S. government paper.

HKEx, the holding company for The Stock Exchange of HongKong Ltd, Hong Kong Futures Exchange Ltd and Hong KongSecurities Clearing Company Ltd, will now apply a haircut of 3percent versus the current 1 percent for bills with a maturityof less than a year. The haircuts applied to longer-dated billsremain unchanged.

"Participants should make necessary funding arrangements tocover any shortfall to their margin requirements resulting fromthe increase in the U.S. Treasuries haircut," the clearing housesaid.

The Hong Kong Monetary Authority, the territory's de factocentral bank, said it was monitoring developments relating tothe U.S. debt ceiling carefully given the liquidity risks thatcould arise.

"The market generally assesses that the chance of a U.S.debt default is small," an HKMA spokeswoman said in an emailedresponse. "However, in the unlikely event a U.S. debt defaulttakes place, there could be disruptions to financial marketoperations and shockwaves to the global financial market."

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