Jake's View

Why I’m not buying the government’s new silver bonds

In spite of an attractive 2pc yield, government bonds targeted for the elderly could be more hassle than they’re worth

PUBLISHED : Wednesday, 27 July, 2016, 4:17pm
UPDATED : Wednesday, 27 July, 2016, 10:59pm

Financial Secretary John Tsang Chun-wah is expecting a “decent” response to the city’s first batch of government bonds targeted for the elderly when applications open tomorrow,

City, July 25

I happen to be eligible for these silver bonds. I hold a valid Hong Kong ID card, I will be 65 by December 31 and, having just returned from a holiday in Canada, I am no longer located there, which, for some reason, would have disqualified me. Don’t ask me why.

I also cannot deny that these so-called bonds offer a reasonable investment. They have a three-year term during which they will yield the rate of consumer inflation or a minimum of 2 per cent. As the chart shows, this would have been distinctly better over the last six years than other government three-year securities.

But I shall not apply.

The government does not need the money, which suggests to me that this is mostly about ambitious people in the civil service trying to look good

In the first place, I refer to these things as “so-called” bonds because real bonds can be bought and sold in the market. These cannot be. If you want out you will have to beg and say “please, please”. You will then only get your unpaid interest at the minimum 2 per cent and no premium for capital value.

I imagine this was done because many buyers of the comparable iBonds previously issued by the government sold out immediately for a capital gain based on the premium yield they would get.

Oh, what nasty speculators. Can’t have that. Let’s discourage such normal market liquidity by making this an inefficient instrument, cut off your nose to spite your face, you know. That’ll learn ‘em.

Secondly, I can apply for these silver bonds only through a limited number of banks. In practise this would mean my HSBC account as silver bonds are not worth jumping through all the anti money laundering hoops required of opening a new bank account these days.

And if I go through HSBC I shall probably have to fill out one of their client risk assessment forms, which I have always refused to do. Their investment sales hawks cannot attack me unless they have my signature on one of those forms. They don’t have it. What a blessing of peace.

In addition, going by the iBonds record, I am unlikely to get more than a single HK$10,000 unit of these things anyway. I am not convinced it’s worth the effort.

But what also puts me off is that this is just a silly government public relations exercise. I gather that the present chief executive’s chances of keeping his job in the next sham election are pretty slim and all the backstabbers in government are now scheming to lift the poisoned chalice from him.

What better way than to make themselves appear caring of the elderly? This is particularly so when normal budget considerations make it impractical to adopt that other much ballyhooed proposal of giving the elderly a blanket HK$3,000 a month each.

This way it is only an extra HK$150 on present indications, and then per year, not per month. It is also available only for three years, only to a limited number of elderly who already have money to spare and only after they go through needless procedural trouble.

The government does not need the money, which suggests to me that this is mostly about ambitious people in the civil service trying to look good through token gestures and then checking the polls to see if they have the ratings numbers yet to knife the boss in the back when Beijing hints that he won’t get the nod next year.

And that’s enough for me to say that I don’t really want much to do with these silver bonds. The whole exercise rings false.