Hong Kong readies for second ‘silver bond’ issue

Bond targeting senior citizens offers a minimum rate of 2 per cent, double that of an iBond

PUBLISHED : Thursday, 01 June, 2017, 8:40pm
UPDATED : Thursday, 01 June, 2017, 10:39pm

The Hong Kong government has announced the launch of the city’s second “silver bond” offering that targets citizens aged 65 or above, riding on the success of the first batch last year.

The latest issue, which aims to raise HK$3 billion, offers holders an interest rate that is linked to inflation in the city, subject to a minimum of 2 per cent.

The first batch, also in size of HK$3 billion, has proven to be a success when it was closed for subscription in August last year, with total subscriptions exceeding three times the issue amount.

Senior citizens pounce on government’s ‘silver bond’ offering

The silver bond offers a return rate that is double that of an iBond, which is also an inflation-linked bond but is open to people of all ages.

Unlike the iBond, however, there will not be any secondary market for the silver bond. Holders can sell their bonds before maturity to the government at the original price together with the unpaid accrued interest.

“There will not be any secondary market for the silver bond because we try to encourage the elderly to hold the bond for the long run,” said Li Shu-pui, executive director (financial infrastructure) of the Hong Kong Monetary Authority.

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

Li said the silver bond issue aimed to provide senior citizens with an investment product that offered steady returns.

He expected the response would be positive even though other fixed-interest products issued by private financial institutions could offer returns of more than 2 per cent in the wake of an upward cycle for interest rates.

Hong Kong senior citizens targeted with new ‘Silver Bonds’ offering returns double those of iBonds

The government said it hoped to encourage financial institutions to tap into the immense potential of the market through the bond sale.

“We will review the effectiveness of the scheme upon completion of the silver bond pilot scheme,” a government spokesperson said on Thursday.

Subscription for the bond will run from June 6 to 14 with the launch date set for June 23. It will have a tenor of three years.

Interested parties can apply for the bond through 20 placing banks such as HSBC Holdings and Bank of China (Hong Kong).