Institutional Bond Issuance Programme

Ten Recognized Dealers have been appointed as Primary Dealers based on the criteria set by the Hong Kong Monetary Authority (HKMA). Primary Dealers of the institutional bond issuance programme are obliged to provide liquidity in the government bond market by providing two-way bid/offer quotations for the bonds. They are also encouraged to provide indicative quotes and execute trades on the Electronic Trading Platform. In return, they have exclusive right to participate in the competitive tenders of the primary offer under the institutional bond issuance programme. A list of the Primary Dealers is available here.

Government bonds are issued by the Government of the Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR Government). The HKMA is tasked to implement the issuance of government bonds under the GB Programme. Government bonds under the institutional bond issuance programme are sold at auctions by means of a multiple-price auction mechanism. Investors may submit a competitive bid through Primary Dealers. The bids are made in terms of the bid price and the quantity applied for. Competitive tenders accepted will normally be allotted in descending order of the bid price indicated in the applications.

Investors may find the list of government bonds to be tendered in the coming six months in a tentative issuance schedule, which is usually released in March and September of each year, covering tenders in the six-month period starting April and October respectively. The HKSAR Government will announce the details of an upcoming issue in a press release at least four business days before the tender date.

The HKSAR Government will announce in the website of the GB Programme the issue code, issue date, maturity date, tenor, coupon rate and the amount of the new government bonds to be offered for competitive tender at least four business days before the tender date of the government bonds. Information on the latest issue of government bonds is available here.

Recognized Dealers are financial institutions appointed by the HKSAR Government to assist in the development of the government bond market. Recognized Dealers can maintain securities accounts with the HKMA to hold government bonds on behalf of their customers. A list of the Recognized Dealers under the GB Programme is available here.

A number of Recognized Dealers have been appointed as Primary Dealers to maintain a liquid secondary market in the institutional (professional) market of government bonds. The appointment of Primary Dealers is based on the criteria set by the HKMA. The appointed Primary Dealers under the institutional bond issuance programme are required to provide two-way bid/offer quotations for the government bonds so as to promote secondary-market trading. In return, they have exclusive right to participate in the competitive tenders of the primary market. A list of the Primary Dealers under the GB Programme is available here.

A press release including a price-yield conversion table will be issued by the HKSAR Government at least four business days before the tender date of an upcoming issue of the government bonds. Investors may refer to the table to convert their own estimation of the yield on the government bond issue into a price. Investors, however, should perform independent checks to verify the accuracy of the price-yield conversion table before submitting tender bids. The yield on the government bonds is market-determined. Generally speaking, the yields on the government bonds of similar remaining maturity will be close to each other. The prevailing yields on and prices of all outstanding government bonds derived from the government bond indicative pricings are announced on each business day in the GB Programme’s website (www.hkgb.gov.hk).

Primary Dealers whose tenders have been successful in whole or in part will be notified of their allotment and the amount payable as soon as practicable after the allotment. They will then inform individual investors through mutually agreed channels. The average accepted price and the lowest price at which the government bonds have been allotted in the tender will be announced not later than 3:00 p.m. on the tender date on the Refinitiv screen (HKGBINDEX), Bloomberg, and in the Hong Kong Government Bonds website (www.hkgb.gov.hk).

Re-opening refers to the tendering of additional amounts of an outstanding issue of government bonds before the maturity of the issue. This technique, commonly employed in other jurisdictions, helps build up the size of individual bond issues over time to improve liquidity in the secondary market.

Successful bidders for a re-opened issue will have to pay to the HKMA the bid price plus an amount equal to the interest accrued between the last coupon payment date and the allotment date of the re-opened issue. The accrued interest payable on a re-opened issue is also reported in the detailed tender information which will be released at least four business days before the tender date.

The coupon rate on a government bond to be re-opened is set with reference to the market interest rate prevailing at the time when the government bond was first issued. When an issue of government bonds is re-opened for tender, the market interest rate may have moved and deviated significantly from the fixed coupon rate on the government bond. Investors should note that the return on investing in a government bond will depend on both the coupon rate and the price at which the government bond was purchased.

Investors may refer to the government bond indicative pricings for the prevailing market price and yield of all issues of government bonds. The Electronic Trading Platform will also provide a channel for the market players involved to provide indicative quotes and execute trades. For the historical reference yields, please see Statistics.

Benchmark government bonds are the most actively traded issues of government bonds among all outstanding issues. From time to time and in accordance with established rules, government bonds of maturity nearest to the benchmark tenor are chosen as the benchmark issue to represent that tenor. The existing benchmark issues may be seen in the government bond indicative pricings announced on each business day in the website of the GB Programme.

The HKMA has established a set of indicative pricings for the Hong Kong dollar government bonds . The indicative pricings are calculated on a mid-price basis and are compiled on each business day by Refinitiv based on quotes at 11:00 a.m. provided by Primary Dealers designated by the HKMA. A set of closing reference rates is calculated at about 4:00 p.m. The indicative pricings and the closing reference rates indicate the price of the government bonds prevailing in the institutional (professional) market at the respective times of a business day. Both the indicative pricings and the closing reference rates are available in the GB Programme’s website (www.hkgb.gov.hk).

Government bond indicative pricings are indicative mid-prices calculated from bid and offer quotes provided by Primary Dealers in the institutional (professional) market, which may differ from the quotes obtained by investors from Recognized Dealers due to factors which are heterogeneous to different Recognized Dealers and Primary Dealers, such as the bid-ask spread and embedded transaction fees.