Silver bond rateremains at 3pc

Hong Kong will launch a fourth batch of silver bonds worth HK$3 billion for subscription on Wednesday for residents aged 65 or above with a minimum return of 3 percent.

Avery Chen

Friday, July 05, 2019

Hong Kong will launch a fourth batch of silver bonds worth HK$3 billion for subscription on Wednesday for residents aged 65 or above with a minimum return of 3 percent.

The new batch has a tenor of three years. Holders will be paid interest once every six months at a rate linked to inflation, subject to a fixed rate of 3 percent.

The subscription period will start from 9 am on July 10 and end at 2 pm on July 18.

Those born in 1954 or before holding a Hong Kong identity card can apply through one of the 20 placing banks or 19 designated securities brokers. The bond will be issued on July 29.

There will be no secondary market. But there is an early redemption arrangement in place. Holders can sell their bonds before maturity to the government at par together with accrued but unpaid interest.

The bonds cannot be transferred.

Holders can only transfer the bonds from a placing bank or designated securities broker to an account under the same names with the same or another placing bank or designated securities broker.

"The issuance of the Silver Bond is intended to provide an investment product with steady returns for senior citizens and encourage financial institutions to tap into the immense potential of this 'silver market' by introducing a wider spectrum of appropriate products," a government spokesperson said.

The rate for the latest silver bond was kept at 3 percent despite the Hong Kong interbank offered rate and time-deposit rates rising recently.

Wong Tsz-cheuk, managing director, head of Greater China fixed-income trading, global market at the Hongkong and Shanghai Banking Corporation believes the rate is at a reasonable level as Hibor increase is driven by seasonal factors such as initial public offerings and the market is facing increasing downside risks from interest rates.

HSBC and BOC Hong Kong (2388) said the banks will offer fee waivers for subscription handling, transfers-in, safe custody, interest collection, early redemptions and redemptions at maturity.

Wong said 3 percent is attractive, as it is higher than the three- and six-month deposit rates at major banks, and also higher than 10-year and three-year government bonds yields.

Lydia Chan, head (currency and settlement) of the Hong Kong Monetary Authority, said redemption rates of the past three tranches of silver bonds were low at 4.9 percent, 3.7 percent, and 0.3 percent respectively. The government launched the first Silver Bond in July 2016.