Hong Kong Expands Silver Bond Offering and Increases Coupon Rate to Counter Cost of Living
In an effort to help senior citizens cope with the rising cost of living and currency weakness, Hong Kong is expanding its Silver Bond offering and raising the coupon rate. The Hong Kong Monetary Authority (HKMA) announced that it will offer HK$50 billion (US$6.4 billion) of Silver Bonds for sale to individuals aged 60 and above.
The decision to increase the size of the inflation-linked bond offering by as much as 57% and raise the coupon rate is aimed at boosting the income of senior citizens in an uncertain economic climate. The new batch of Silver Bonds will be available for sale from July 28.
The underlying composite inflation rate in Hong Kong was 1.8% in May, with prices rising 1.7% in 2022. Housing accounts for 40% of the inflation basket, while food makes up 27%. The local currency has also been trading at the weak end of its band against the US dollar for much of the past year.
According to Darryl Chan, the deputy CEO of the HKMA, the issuance size aims to promote greater participation by senior citizens, while the higher coupon rate aims to assist them financially in the current uncertain investment environment. He highlighted that Silver Bonds are a safe and flexible investment for the elderly.
The maximum subscription for each investor is HK$1 million worth of inflation bonds, which are not transferable and cannot be traded on the secondary market. However, investors have the option to cash out before the maturity date by selling the bonds back to the government.
Wong Tsz-cheuk, the head of Greater China FX cash and EM rates trading at HSBC, described Silver Bonds as a quality asset for senior citizens and praised them for being defensive and forward-thinking.
Around 2 million individuals born in or before 1964 are eligible to subscribe for the Silver Bonds, according to Chan. He noted that even those elderly residents who do not have a specific birth month or day stated on their local identity cards are eligible to participate.
With the expansion of the Silver Bond offering and the increase in the coupon rate, Hong Kong aims to provide its senior citizens with a reliable and beneficial investment opportunity in the face of economic uncertainties and rising living costs.
