Hong Kong dollar-denominated bond issuance has lost momentum following a record month as high local interest rates eroded borrowing appetite.
Total issuance in the city’s currency, which is pegged to the US dollar, reached HK$357.7 billion (US$46 billion) in October, a decrease of about 30 per cent from September’s all-time high, according to Bloomberg-compiled data going back to 1988.
The lower sales volume came as the Hong Kong interbank offered rate (Hibor), a funding cost benchmark in the Asian financial hub, remained elevated after hitting a four-month high in late September. Liquidity has been tight in recent months due to a rally in stocks and efforts by the city’s monetary authority to defend its currency peg.
“It’s a payback of post-summer issuance peak in September,” said Ryan Lam, head of research at Shanghai Commercial Bank.
Behind the Hibor’s earlier surge were also banks’ strong quarter-end cash demand as they prepared for regulatory checks, as well as seasonal factors such as China’s National Day holiday in early October.
The aggregate balance – a measure of interbank liquidity – has shrunk by almost 70 per cent to HK$54.68 billion from its peak in early June.
