Hong Kong sells one of its biggest ‘Silver Bonds’ at lower coupon before US Fed’s rate cut

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Enoch Yiu

Published: 4:09pm, 10 Sep 2024Updated: 9:16am, 11 Sep 2024

Hong Kong is cutting the guaranteed annual coupon for its ninth round of “Silver Bonds” for investors aged 60 and above to cope with faster inflation, days before a widely expected US interest rate cut next week.

The government will offer HK$50 billion (US$6.4 billion) of Silver Bonds, one of the largest tranches since the fixed-income product was introduced eight years ago, to help the city’s greying society overcome higher living costs and volatile financial-market returns, according to the Hong Kong Monetary Authority (HKMA).

The three-year bonds will pay a guaranteed annual coupon of 4 per cent, versus 5 per cent for similar bonds sold in August last year but in line with an offering in August 2022. The securities will pay the minimum guaranteed rate or a floating rate pegged to the city’s inflation rate, whichever is higher.

“Since the guaranteed return is lower than that of last year’s issue, it is expected the number of subscriptions may be lower this time,” said Kenny Ng Lai-yin, a strategist at Everbright Securities International. “The 4 per cent rate is acceptable, as it is still higher than current time deposits and other bond products, while it carries a risk lower than stock investments.”

The size of the inflation-linked bond offering matches the amount in last year’s offering and is higher than the HK$35 billion sale in August 2022.

Some 2.4 million senior citizens are eligible to buy the Silver Bonds this round, says Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury. Photo: Enoch Yiu

The HKMA conducts the bond offering on behalf of the government, while Bank of China (Hong Kong) and HSBC are co-arranging the sale. Buyers can also bid for the bonds via more than 20 participating banks, including Bank of East Asia, Hang Seng Bank and Bank of Communications.