Demand drops for iBonds as investors shift to stocks

Public demand for iBonds has fallen 27 per cent from last year, data from the Hong Kong Monetary Authority (HKMA) shows.

This year’s issue of the inflation-linked bonds received HK$28.8 billion in orders, compared with HK$39.6 billion in June last year, and the HK$49.8 billion the year before.

Each year, the HKMA issues HK$10 billion of government-backed bonds that pay a yield linked to Hong Kong’s inflation rate. The bonds are almost entirely distributed to the public.

As the government can price its debt much cheaper in the institutional market, the iBond programme is effectively a government subsidy to Hongkongers to help them cope with the city’s high inflation.

However, local individual investors are increasingly being drawn back into Hong Kong-listed equities, brokers said, as the Hang Seng Index trades at its highest level in three years.

Last month, the HKMA paid a 4.02 per cent annualised coupon on the iBond due this year. By comparison, the Hang Seng Index has climbed 12.2 per cent over the past year.