Exchange Fund Bills and Exchange Fund Notes
Investors either hold Bills or Notes until maturity or sell them prior to maturity at current market rates through Recognised Dealers or through the Hong Kong Exchanges and Clearing Limited (HKEx). Normally, investors need a bank account and an investment account before entering into a transaction. Investors should consult with their Recognised Dealers and Stock Exchange Participants about relevant procedures and practices.
To create a liquid secondary market for Bills and Notes, the Hong Kong Monetary Authority (HKMA) designates a number of Recognised Dealers as Market Makers. As reference, the Exchange Fund Notes Fixings, published daily by the HKMA, provides a list of outstanding issues and their indicative market price and yield.
Click here for Exchange Fund Notes Fixings.
Transferring Securities
Bills or Notes can be transferred from one Recognised Dealer security account to another through book entry. Transfer instructions should be transmitted to the Central Money Markets Unit (CMU) terminal or by facsimile or telex provided by Recognised Dealers or by other means as advised by the HKMA. All transfer instructions must reach the HKMA by 2:30pm or by 3:00pm local time in case of instruction submitted via the CMU terminal. The HKMA reserves the right not to process instructions after the deadline.
Investors collect interest or redemption payments through Recognised Dealers or the Central Clearing and Settlement System (CCASS). On interest payment dates and redemption dates, the Hong Kong Monetary Authority (HKMA) arranges for the designated settlement account of the Recognised Dealer or CCASS to be credited with the relevant payment.
All payments of principal and interest on Exchange Fund Notes are credited through the investment account where the Notes are held.
Reopenings are the offering of new securities with the same terms and conditions as an existing issue. They are used to increase the size of an outstanding issue. A re-opened bond has the same maturity date, security identifier, and coupon rate as the original security. The only difference is that they have a different issue date and usually, a different purchase price based on current market yields.
What issues are reopened?
The Hong Kong Monetary Authority (HKMA) rolls over all 3-year Exchange Fund Notes (EFNs) by reopening 5-year EFNs with a remaining maturity of 36 months.
The HKMA may reopen a particular issue of Exchange Fund Bills (EFBs) by re-issuing Bills bought from the secondary market plus those held in the reserve for tender. Original maturity of EFBs will remain unchanged.
What are the schedules for reopenings?
Click here for HKMA announcements for reopening of 5-year Exchange Fund Notes.
How to buy reopened securities?
Generally, applications for purchasing reopened issues follow the same procedure as that of a new issue. Official Fixings issued 8 business days before the tender date determines the Application Amount of a reopened issue. The Application Amount is 102% of the amount payable for the Notes of the Official Fixings price plus handling fee and accrued interest on the reopened Notes.
Successful bidders of a reopened issue pay the HKMA the bid price plus an amount equal to the interest accrued from the last interest payment to the allotment date of the reopened issue. The accrued interest payable is announced with the detailed tender information released 7 business days before the tender date.