Hong Kong Government to Issue New iBonds With 2% Minimum Return

The target issue size will be up to HK$10 billion but could be up to HK$15 billion.
Shirley TianOct 06,2020,19:07

Later this month, people in Hong Kong will be able to subscribe to the latest inflation-linked three-year retail bond, or known as iBonds, according to the Hong Kong Monetary Authority (HKMA) latest announcement.

The target issue size will be up to HK$10 billion. Subject to market response, HKMA may increase the size to a maximum of HK$15 billion.

Hong Kong residents will be able to subscribe in HK$10,000 increments local banks or securities brokers from 9am on October 23 to 2pm on November 5.

Bond holders will be paid interest once every six months at a rate linked to inflation in Hong Kong, subject to a minimum rate of 2%, according to the announcement.

Financial Secretary Paul Chan said the iBond issuance is an initiative announced in the 2020-21 Budget to provide residents with a safe and stable investment alternative while further developing the local bond market.

Monetary Authority Senior Executive Director Edmond Lau said this is the right time to reissue iBond.

“The increased geopolitical risk and lingering of the pandemic situation could lead to market volatility and increase the risk of investment, said Lau. “The reissuance of the iBond this year is therefore timely, which could provide the public with a stable and safe investment option under the existing low interest rate and uncertain market environment.”

He added, “under the current low inflation and low interest rate environment, we believe that the issuance of the iBond with a guaranteed return of 2% would bring a stable and attractive return to investors and hedge against the potential future inflation risk.”

Local news commentators said the new iBonds will be oversubscribed as usual, as it is very difficult to find a low-risk investment product with more than 2% returns as of late.

This batch of iBonds is the seventh series issued since 2011. According to Lau, at HK$15 billion, it would be the highest iBond offering to date.

Topics:iBonds, Hong Kong