The Hong Kong Mortgage Corp, a government-owned agency to promote the home loan market, would sell bonds linked to the interbank market rate to retail investors for the first time next week, market sources said.
The bonds would be part of a new batch of at least HK$700 million retail bonds that the HKMC planned to sell, sources said. HKMC has been offering bonds to retail investors as a move to boost the market. Last year it sold HK$1.2 billion retail bonds, including the first-ever zero coupon bonds.
James Lau, the chief executive of HKMC, said the company planned to sell as much as HK$1 billion in retail bonds this month.
A dealer said Hibor (Hong Kong interbank offered rate) linked notes were rather new to retail investors, so the response to the HKMC's sales was not expected to be overwhelming. 'Retail investors need to take time to understand such new product,' he said. Bondholders of the one-year notes could earn an annual rate of 5.25 per cent if the three-month Hibor rate fell between zero and 5.25 per cent. It was 4.225 per cent yesterday.
The special structure would allow investors to earn higher yields than four-year straight bonds, sources said. The yield of four-year Exchange Fund bonds stood at 4.061 per cent yesterday.
'However, no interest could be earned on days when the three-month Hibor falls out of the range,' sources said, adding that HKMC has the option to extend the maturity of the notes to 2011.