Global bond fund managers welcomed the approval of launching northbound trading of the Bond Connect, saying this is a progressive and incremental step to open the world's third-largest bond market after the United States and Japan, with a total debt value estimated at $9.5 trillion.

The People's Bank of China and the Hong Kong Monetary Authority on Tuesday jointly announced that overseas institutional investors in Hong Kong and other economies and areas could invest in bonds traded in the China Interbank Bond Market, with more investment quota being set for northbound trading. The date of the formal launch will be announced later.

Southbound trading, in which mainland investors invest in the Hong Kong bond market, will be explored in due course, according to the PBOC and HKMA joint statement.

"Chinese onshore bonds provide the best risk-adjusted returns with low or little correlation to global risky assets such as equities and commodities," said Bryan Collins, fixed income portfolio manager at Fidelity International. "This is a compelling case to invest in onshore bonds as they provide the benefits of diversification and risk-free asset correlation."

Other global bond fund managers reckon that the Bond Connect can help improve market liquidity, foster more issuances of corporate bonds in China, and strengthen the country's credit rating standard.

"The Bond Connect can elicit more different types of institutional investors to participate in the onshore bond market," predicted Angus Hui Tze-fung, Asian fixed income fund manager at Schroder Investment Management (Hong Kong).

Though the Chinese mainland bond market could overtake Japan for the number two spot in the next several years, overseas investor participation is still rendered low. At end-2016, foreign ownership of Chinese mainland onshore bonds fell to 1.3 percent, according to a Deutsche Bank report in February.

"The program should also foster the growth of corporate bonds, in tandem with government bonds and bonds issued by policy banks," Angus Hui added.

"There is still no standardized international credit rating for mainland companies when they issue debt instruments in the onshore market," said Ken Hui Hon-wah, chief operating officer at Fullgoal Asset Management (HK). "We hope the Bond Connect can stimulate the development of credit rating in the country."

"The Bond Connect could be another step toward potential index inclusion for the onshore bond market as it offers a simple access route for even more foreign investors," said Gregory Suen, fixed income investment director at HSBC Global Asset Management.