iBonds on sale today: HK$10,000 entry, inflation-linked coupon

(Editor’s note: this report was originally in English and is rewritten in Chinese per this site’s practice.)

The government’s first inflation-linked bonds, or iBonds, open for subscription next Monday: up to HK$10 billion on offer via an IPO on the local bourse. The three-year bonds carry a ticket price of about HK$10,000, pay half-yearly dividends, and offer a 1% fixed rate plus an inflation-linked floating rate.

How is the iBond coupon set?

1% floor, higher when inflation runs hot. The yield is set by inflation over the previous six months — or the return on other bonds held by the government, whichever is higher. With Hong Kong inflation hitting a 34-month high of 5.2% in May and averaging 4.02% over the past six months, subscribers could pocket an annualised yield above 4%, beating most time deposits. Financial Secretary John Tsang said the issue aims to develop Hong Kong’s retail bond market by raising awareness and interest in bond investment among retail investors.

Where can you subscribe?

Twenty banks, including HSBC and Bank of China (Hong Kong). HSBC and BOC Hong Kong are among the 20 placing banks handling the issue, with the deal signed today. Hong Kong ID cardholders may apply through any placing bank, securities broker or the Hong Kong Securities Clearing Company. The government bond programme was first announced in February’s budget as a measure to give citizens an investment option to cope with inflation.

To protect purchasing power against inflation, visit MPF fund comparison.