Hong Kong’s inflation-protected bonds for senior citizens have received an overwhelming response after the government promised to pay the highest coupon on the securities since they were first introduced to retail investors in 2016. The three-year bonds will pay the higher of 3.5 per cent or the average consumer-price inflation, a sweetener for residents in an economy facing its worst slump in economic activity and employment . The annual coupon is seven times more than the average rate on time deposits. Investors bid for HK$43.3 billion (US$5.6) worth of Silver Bonds, far exceeding the bids for its previous four issues carrying 2 to 3 per cent coupon sold from 2016 to 2019, according to preliminary results released by the government on Friday. The government will sell HK$15 billion of them, raising the size from an initial HK$10 billion. Subscriptions ended at 2pm local time on Friday. About 140,000 people applied for the bonds, which are meant for permanent residents born in or before 1956. In comparison, about 56,600 applicants subscribed for HK$7.9 billion worth of the bonds last year. “Customers have showed a keen interest in the latest tranche of Silver Bonds, evidenced by the new record achieved,” HSBC, which is the joint lead manager with Bank of China (Hong Kong), said in a statement on Friday. The total subscriptions received were about five times that of 2019, it said. The amount of subscriptions recorded by BOCHK also quintupled from last year, while the total number of applicants also doubled, it said in a statement. Each applicant subscribed for about 30 lots, with each lot amounting to HK$10,000. Both lenders also reported a jump in online applications this year, as customers shifted to digital channels and banks reduced face-to-face frontline contact with customers during the pandemic. The 3.5 per cent bond coupon compares favourably with the average 12-month bank deposit rate of 0.5 per cent. The annualised return of seven bond funds under the city’s mandatory pension plan stands at 1.78 to 2.24 per cent, while the benchmark Hang Seng Index has declined 6 per cent so far this year. The coupon sweetener comes as a form of relief for the city’s residents amid its worst recession and record-low interest on savings. The government has also made cash handouts and raised the coupon on inflation-linked bonds, or iBonds, sold to retail investors in October. Hong Kong’s old playbook on inflation bonds encounters new risk factors. Should retail investors worry? Hong Kong has set aside about HK$311 billion, or more than 10 per cent of its 2019 gross domestic product , including three instalments of its anti-epidemic fund, to help shore up the economy. Yet, four waves of Covid-19 infections have continued to slam the economy and a fast ageing population. The strong demand for Silver Bonds follows the hot reception for the sale of HK$15 billion of iBonds last month, which drew HK$38.4 billion in subscriptions from the broader public. One customer applied for as many as 800 lots, or HK$8 million worth of Silver Bonds, according to Industrial and Commercial Bank of China (Asia). Each applicant on average applied for about HK$500,000, triple the size in the 2019 offering, it said in a statement. The Silver Bonds will be distributed round by round if the overall subscription exceeds HK$15 billion, to ensure applicants for small numbers of bonds are served first, the government said last month.