(Adds stock connect announcement)
By Michelle Price and Andrew Galbraith
HONG KONG/SHANGHAI, July 1 (Reuters) - "Northbound" trading through a long-awaited "Bond Connect" programme to connect China's $9 trillion bond market with overseas investors will start on Monday, according to a calendar posted Friday evening on the programme's website.
The announcement, timed to coincide with the 20th anniversary of Hong Kong's handover to Chinese rule, marks the latest step in the opening up of China's capital markets. It follows the introduction of similar programmes allowing two-way trading between stock markets in Hong Kong and Shanghai and Shenzhen.
As previously announced by regulators, trading through the programme will initially commence "Northbound", meaning foreign investors will be able to buy and sell Chinese bonds. The authorities have not yet indicated when Chinese investors will be able to trade Hong Kong and overseas bonds, known as "Southbound" trading.
Access to China's bond market through the programme will remain restricted to overseas institutional investors such as banks, insurance companies, securities companies and fund managers. Trades through the "Bond Connect" will not be subject to quotas.
China granted eligible foreign institutional investors access to its interbank bond market in 2016, but the "Bond Connect" should add another, more convenient channel for foreigners looking to access the world's third largest bond market via Hong Kong, the regulators have said.
However, market participants expect muted uptake of Chinese onshore bonds initially, due to ongoing fears over the depreciation of the yuan amid capital outflows and other technical investment hurdles.
The People's Bank of China has taken steps to support the yuan, moving in May to set it daily at the mid-point and raising the cost of short-selling the currency.
While pressure on the yuan has eased recently, authorities have continued to see the "Bond Connect" programme as an opportunity to attract global capital inflows.
Eligible offshore investors will be able to conduct trades through the China Foreign Exchange Trade System (CFETS) through Tradeweb, a fixed-income trading platform.
Tradeweb is majority-owned by Thomson Reuters, the parent company of Reuters News.
Separately, China's insurance regulator said in a statement late Friday that mainland Chinese insurance companies will be allowed to invest in Hong Kong shares via the Shenzhen-Hong Kong Stock Connect. (Reporting by Michelle Price in Hong Kong and Andrew Galbraith in Shanghai; Additional reporting by Ben Blanchard in Beijing; Editing by Nick Macfie)