Market Summary

Yield Movements

Hong Kong, China’s local currency (LCY) government bond yield curve shifted upward for all tenors between 1 March and 15 May due to tightening domestic liquidity. Yields for short-term bonds were higher than the yields for long-term bonds resulting in the curve climbing more steeply at the short-end and flattening at the long-end of the curve. Hong Kong, China’s government bond yield movements largely tracked rate movements in the United States.

Size and Composition

Local currency bonds outstanding in Hong Kong, China reached HKD1,890 billion (USD241 billion) at the end of March, down 0.9% quarter-on-quarter, but up 2.1% year-on-year. The quarter-on-quarter decline was due to contractions in both government and corporate bonds. On a year-on-year basis, the contraction in corporate bonds dampened the expansion in government bonds.

Policy, Institutional and Regulatory Developments

In May, the Hong Kong Monetary Authority (HKMA) issued a circular on the eligibility criteria for the 3-year Pilot Bond Grant Scheme which seeks to attract local, mainland, and overseas enterprises to issue bonds in Hong Kong, China. The said scheme is set to be launched upon the completion of the legislative process for the 2018/19 budget.