HK unveils 11th Silver Bond with 4.25% interest rate floor

Hong Kong's government unveiled the 11th Silver Bond issue, with a 4.25% interest rate floor. That marks the second highest rate on record from the low-risk investment product targeting local senior investors.

In the 11th Silver Bond issue, the government has raised the issuance size to a maximum of 55 billion dollars from the original 50 billion-dollar target.

The three-year bond's semi-annual interest payments are tied to the city's average annual inflation rate -- and follow whichever that's higher in level. Each eligible investor, who was born in 1967 or earlier holding a valid Hong Kong identity card, will be allowed to subscribe for up to 100 board lots, with each board lot costing 10,000 dollars.

CHRISTOPHER HUI, Secretary for Financial Services and the Treasury: "Basically we made reference to some of the similar products available in the market, including for example, right now if you talk about 12 month time deposits, the rates being offered right now is 2 to 3%. And at the same time, given the fact that it is a three-year term bond, we believe that our product is sufficiently attractive."

The bonds will not be listed on any exchange or traded in a secondary market, while investors may sell the bond back to the government before maturity by requesting an early redemption.

The 11th batch of silver bonds will be issued under the infrastructure bond framework, and proceeds will be used to fund public works projects, aiming to enhance Hong Kong's infrastructure and city development.

Applications will run from August 21 to September 4. It's expected to post the allocation results on September 11 and launch the bond issuance on September 15.

Based on last year's numbers, the government is expecting more than 300,000 applicants this year. Relevant interest rates will be announced on the Hong Kong Government Bonds website.