Accrued interest Accrued interest is the interest earned by the seller from holding the bond between the last interest payment date and the disposal date.
Application amount / price Application price will normally be expressed as a percentage of the principal amount of the Government Bonds under the Retail Tranche. Application amount is the amount a retail investor will pay when he/she applies for a new issue of the Government Bonds. Upon application, he/she is required to pay an amount equal to the application price plus the handling fee or brokerage fee.
Authorized Institution An institution authorized under the Banking Ordinance to carry on the business of taking deposits. Authorized institutions are supervised by the HKMA.
Basis point (bp) One hundredth of 1% (i.e. 0.01%)
Benchmark Bonds Benchmark bonds are usually the most actively traded and representative issues among a series of bonds issued by an issuer.
Bid / Offer price Bid price is the price for which an investor is willing to buy a security. Offer price is the price for which an investor is willing to sell a security.
CCASS The Central Clearing And Settlement System (CCASS) is a computerised book-entry clearing and settlement system for transactions in securities listed on the Stock Exchange of Hong Kong. It is operated by the Hong Kong Securities Clearing Company Limited (HKSCC) which is also a Recognized Dealer of the Government Bonds.
Clean price When the price of a bond is quoted as a “clean price”, it means the quoted price does not reflect the accrued interest. A buyer of the bond would normally need to pay to the seller the purchase price plus an amount equal to the accrued interest on the bond.
Competitive tender Competitive tender is a tender method that requires bidders to specify bid prices and, where necessary, the quantities applied for in the bid. Tenders are normally accepted in descending order of the bid price.
Coupon/Coupon rate Coupon is the total annual interest paid on a bond holding, usually in two equal installments semi-annually. It is usually expressed as a percentage of the nominal value of a bond, which is referred to as coupon rate. This can be a fixed rate (i.e. the rate is fixed throughout the life of a bond), floating rate (i.e. the rate is re-set periodically based on some reference rate, such as HIBOR or LIBOR, plus a spread) or zero rate. All Hong Kong dollar Government Bonds have fixed coupon rates that do not change during the life of the bonds.
Custody fee Government Bonds are issued in computerised book entry form only. Investors can only hold the Government Bonds through a Recognized Dealer’s securities account with the HKMA. A custody fee is the fee charged by Recognized Dealer for providing the safe custody services.