The Hongkong and Shanghai Banking Corporation has raised the Hong Kong dollar time deposit rates by up to 30 basis points, sending the interest rate of 12-month time deposits to 1.5 percent.

The interest rate of six-month time deposits was also increased by as much as 20 basis points to 1.1 percent, according to the lender's website.

Fubon Bank has also hiked the 12-month time deposit rate for HK$500,000 to 2.8 percent, which means a customer can receive HK$14,000 in interest for a one-year fixed deposit of HK$500,000.

This is so far the highest time deposit rate offered by banks in the city and is higher than the minimum rate of 2.5 percent offered by the government's retail green bond.

This came as the 12-month Hong Kong interbank offered rate - which is a benchmark rate used for lending between banks within the Hong Kong market - rose to 3.04 percent yesterday. Meanwhile, the six-month Hibor increased to 2.05 percent.

DBS Hong Kong said the Hibor will jump sharply when the aggregate balance falls to around HK$150 billion from the current HK$267.9 billion.

The one-month Hibor has risen for 10 consecutive days to 0.6 percent yesterday, a two-year high.

This came after The Hong Kong Monetary Authority further bought HK$12.82 billion last week in a series of interventions to defend the local currency after it did so on May 12 for the first time since 2019. The move has shrunk the aggregate balance to HK$267.922 billion.

Meanwhile, local banks may need to raise the prime rate in the second half, DBS said, mirroring Standard Chartered's projection last week.

Economists at Standard Chartered last week expected the prime rates to be raised as soon as this year and Moody's Analytics recently upgraded the possibility of a rise to 4 percent.

Liquidity is declining after the authorities bought the local currency and the HKMA followed in the US Federal Reserve's footsteps in raising interest rates.

"Hong Kong dollar liquidity is getting tighter after several rounds of money outflows," said Kevin Lai, chief economist for Asia ex-Japan at Daiwa Capital Markets in Hong Kong. "Hibor is getting more sensitive to the US short term," he said.

HSBC will pay 1.5 percent on 12-month deposits. Sing Tao

HSBC ups deposit rates as Hibor continues to climb