Jake's ViewiBonds are little help in easing inflation and a bad bet financially
The game show here is that our government offers a three-year HK$10 billion bond issue, available in allotments of HK$10,000, which pays a coupon of the rate of consumer price inflation or a minimum of 1 per cent. Given that bank deposits over the past four years have carried interest rates averaging between zero and nothing while the CPI has averaged 3.2 per cent year over year and is at present higher and threatening to go higher yet, the iBond is obviously not a bad bet.
The Hong Kong Monetary Authority's anticipated sale of a third tranche of inflation linked bonds is set to meet a rich vein of demand despite a recent decline in the rate of consumer prices.
The ancient Romans had a phrase for it - panem et circenses - bread and circuses. To forestall unrest among the poor, give them a little food and a lot of game show.
In Hong Kong, for bread read Comprehensive Social Security Assistance (CSSA). For circuses read iBond. There are others but iBond will do.
The game show here is that our government offers a three-year HK$10 billion bond issue, available in allotments of HK$10,000, which pays a coupon of the rate of consumer price inflation or a minimum of 1 per cent. Given that bank deposits over the past four years have carried interest rates averaging between zero and nothing while the CPI has averaged 3.2 per cent year over year and is at present higher and threatening to go higher yet, the iBond is obviously not a bad bet.
But just why should our government want to offer these things when it clearly does not need the money? Our public coffers are brimming with more than HK$1.5 trillion in assets net of any non-government liabilities, topped up by steady fiscal surpluses.
In his 2011 budget speech, when he announced the first iBond tranche, financial secretary John Forgettable explained the purpose as, "The issuance of inflation-linked retail bonds, or 'iBond', will help reduce the impact of inflation on our people."