Hong Kong unveils 10th Silver Bond with 3.85 percent fixed yield, strong demand expected

Hong Kong’s government on Friday announced details of its latest Silver Bond issue, with interest to be paid semi-annually at a rate tied to the city’s inflation, subject to a minimum of 3.85 percent.

Subject to market response, the government may exercise discretion to increase the issuance size to a maximum of HK$55 billion from the original HK$50 billion target.

Applications will be open from September 15 to 29, with each eligible investor — resident born in 1966 or earlier holding a valid Hong Kong identity card allowed to subscribe for up to 100 board lots.

The bonds will not be listed on any exchange or traded in a secondary market, and duplicate applications will be rejected.

Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury, said the 3.85 percent guaranteed rate was attractive compared with one-year Hong Kong dollar time deposits, which currently yield around 2 percent.

Market expectations of US rate cuts — 25 basis points each in September, December and March next year — could push US interest rates down to around 3 percent by 2027, making the Silver Bond’s guaranteed yield highly appealing and likely to see strong demand, Cheuk Wong, Head of Markets & Securities Services, at Hongkong and Shanghai Banking Corporation said.

STAFF REPORTER