The Government will launch the 2020 inflation-linked retail bond or iBond under the retail part of the Government Bond Programme for subscription by Hong Kong residents.
The target issue size will be up to $10 billion. The authorities may consider increasing the issue size to a maximum of $15 billion subject to market response.
The iBond has a minimum denomination of $10,000 and a tenor of three years.
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%.
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 explained that the bond’s reissuance is being done at an opportune time.
“The increased geopolitical risk and lingering of the pandemic situation could lead to market volatility and increase the risk of investment.
“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 that this year’s iBond is an enhanced version with the fixed rate portion increased from 1% to 2%.
“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.”
The subscription period will start from 9am on October 23 and end at 2pm on November 5.
Hong Kong residents may apply for the iBond through a placing bank, securities broker or the Hong Kong Securities Clearing Company.
The iBond will be issued on November 16 and listed on the Stock Exchange of Hong Kong on the following business day.