On August 29, the Hong Kong government announced details for the issuance of the tenth batch of silver bonds, offering a stable 3.85% interest rate over a 3-year term. Secretary for Financial Services and the Treasury Paul Chan stated that silver bonds are a stable and flexible investment option, with the 3.85% fixed rate being attractive compared to current bank deposit products available to citizens, where 12-month Hong Kong dollar deposits offer approximately 2% interest. He also indicated that for the 2025/26 financial year, the government will only issue this batch of silver bonds in the retail bond segment and will not issue any other retail bonds.
Specifically, the tenth batch of silver bonds will be issued under the Infrastructure Bond Programme, with a target issuance amount of HK$50 billion. The Hong Kong government may exercise discretion to increase the issuance amount to a maximum of HK$55 billion. The design of the silver bonds remains similar to previous years, with a three-year term. Each lot of bonds has a principal amount of HK$10,000, with interest payments made every six months, maintaining the maximum allocation limit of HK$1 million. The bonds do not have a secondary market, but investors who need to can sell the bonds back to the government before maturity to recover principal and accrued interest.
The bond subscription period will commence at 9:00 AM on Monday, September 15 of this year and end at 2:00 PM on Monday, September 29. Citizens can subscribe to the bonds through placing banks or designated securities brokers. The eligible age for silver bond subscription remains at 60 years old. Residents born in 1966 or earlier who hold Hong Kong identity cards are eligible to participate in the subscription.
This batch of silver bonds is part of the retail portion under the Infrastructure Bond Programme, with proceeds to be allocated to the Capital Works Reserve Fund. Paul Chan stated that this silver bond issuance is the third batch of retail bonds issued under the infrastructure bond programme. The programme enables better management of cash flow requirements for major infrastructure projects while benefiting economic and livelihood projects for earlier completion. Considering overall market conditions, the government will only issue this batch of silver bonds for the retail bond portion in the 25/26 financial year and will not issue other retail bonds.
Regarding issuance arrangements, the Hong Kong government continues to appoint the Hong Kong Monetary Authority (HKMA) to handle this bond issuance arrangement, and has also appointed BOC Hong Kong and The Hongkong and Shanghai Banking Corporation (HSBC) as joint lead managers to assist and manage the bond issuance work.
Kenny Wong, Head of Capital Markets and Securities Services at HSBC Hong Kong, stated that the market estimates the US will cut interest rates once each in September, December this year, and March next year, totaling 75 basis points. HSBC predicts that US interest rates may fall to around 3% by 2027, making the 3.85% guaranteed interest level absolutely attractive, and believes the subscription response will be enthusiastic.
Albert Chow, General Manager of Personal Financial Products Department at BOC Hong Kong (02388), stated that he believes this time, in addition to having previous silver bond customers' support, the Hong Kong government's promotion of the silver economy should attract new customers, making this opportunity to lock in a 3-year 3.85% stable interest rate quite attractive.