Hong Kong sells one of its biggest ‘Silver Bonds’ at lower coupon before US Fed’s rate cut 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. 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. “The Silver Bonds are low risk investment products which can provide stable returns to investors,” Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury, said on Tuesday. About 2.4 million citizens would be eligible to buy the bonds, he added. The ninth edition of the bonds will be sold under the city’s infrastructure bond framework. Thus, proceeds from the sale will be used to finance projects including the Central Kowloon Route, the Hung Shui Kiu development in Yuen Long, and drainage improvement works in Wong Tai Sin, Hui said. The framework supports projects “for the good of the economy and people’s livelihood, and provide our citizens with a ‘sense of participation’ and a ‘sense of gain’ in support of Hong Kong’s long-term development projects”, Financial Secretary Paul Chan Mo-po said in a statement. The offerings have been popular since the first launch in 2016, and the sale last year attracted a record number of applications. About 323,783 applications worth around HK$71.7 billion were received, equalling about 1.4 times the target issuance. The issue was upsized to HK$55 billion last year to meet the strong demand. Hong Kong’s annual inflation rate stood at 2.5 per cent in July, the highest level since November 2023, when it was 2.6 per cent. Higher costs for housing, transport, electricity, and goods and services have driven the increase. Hong Kong has no official retirement age, but most ­companies require staff to call it a day between 60 and 65. However, more than three-quarters of people believe they will need to work beyond the expected retirement age. They face an average HK$2.4 million gap between their expected post-retirement expenses and the money available in their pension funds, according to a survey of 1,000 Mandatory Provident Fund members carried out by Schroders and released in June. The new batch of Silver Bonds will go on sale from September 30, the HKMA said. Depending on the response, the government may increase the size to HK$55 billion, deputy CEO Darryl Chan said. Subscription will end at 2pm local time on October 14, and the notes will be issued on October 23. Each buyer can subscribe up to a maximum of HK$1 million worth of the bonds. The securities are not transferable or tradeable on the secondary market. Investors are allowed to cash out before the maturity date by selling the bonds back to the government. The HKMA has urged investors to use the electronic method to subscribe the Silver Bonds from banks or brokers, helping the city reduce paper usage, Chan said. https://www.scmp.com/business/article/3277930/hong-kong-offers-us64-billion-silver-bonds-4-coupon-inflation-bites (ICE HONG KONG)

Fonte notizia: South China Morning Post