THE Hong Kong dollar debt market looked nervous yesterday as the Hang Seng Index was sold off below 7,000 by investors.
Late in the day, three-month Hong Kong interbank offered rate (HIBOR) was being quoted at between 8.25 per cent and 8.625 per cent as the interbank market struggled for equilibrium.
Negative factors dampening the interbank market include expectations of an interest rate rise in the next few weeks, uncertainty about asset deflation because of the falls in property values, and about the health of China's paramount leader Deng Xiaoping.
Although there was no direct correlation between the HSI and the debt market, sentiment was taking its toll of both, bankers said.
Nervousness about the US Federal Reserve was continuing to hold back the market, they said.
The Federal Reserve is expected to increase rates at the end of the month, after recent economic data from the United States suggesting robust economic growth.
The Hong Kong Association of Banks (HKAB) was expected to raise the prime rate on January 13 after the worst of the sell-off of the local dollar was over, but the increase never materialised.
