Darius Baruo
January 29, 2026 11:01
The HKMA announced a Feb. 4 auction for floating rate bonds linked to an overnight index average, the proceeds of which will be used to fund infrastructure projects.
The Hong Kong Monetary Authority will tap the bond market with a HK$1.5 billion floating rate bond issue next week, giving institutional investors exposure to Hong Kong’s overnight lending benchmark amid rising interest rates.
The auction is scheduled for February 4, with settlement to take place the following day, and the one-year bonds will be issued under Hong Kong’s infrastructure bond program. Interest payments are linked to HONIA (Hong Kong Dollar Overnight Index Average) plus auction-cleared spreads and are paid quarterly.
Why is HONIA important now?
The timing is notable. Recent market data shows that deposit interest rates in Hong Kong are above 7%, leading to an overall increase in financing costs. HONIA, which reflects the actual cost of overnight unsecured interbank lending, is becoming increasingly important as global markets move from LIBOR-style benchmarks to transaction-based reference rates.
As a backdrop, Hong Kong’s traditional interbank rate, HIBOR, spiked in August 2025, creating volatility in floating rate products. Products linked to HONIA provide an alternative to tracking actual nightly transactions rather than bank submissions.
Bid details
The bond has a stock symbol of 4200 and has a maturity date of February 5, 2027. The minimum bid amount is HK$50,000 and can only be accessed through designated primary dealers under the program. Regardless of how HONIA moves, interest rates are floored at zero. This is important protection if interest rates somehow go negative.
Quarterly interest payments will be made on May 7, August 7, November 9, and February 9, 2027. Trading on the Hong Kong Stock Exchange will begin on February 6.
where the money goes
Unlike general borrowing, the proceeds will go directly into infrastructure projects based on the framework announced by the government. This gives the issue specific use of proceeds obligations, which could appeal to investors seeking ESG and impact obligations.
The bid results will be announced by 3pm Hong Kong time on February 4 and will be available through Bloomberg (GBHK), Refinitiv and the HKMA website. As interest rates rise and infrastructure spending becomes a focus, demand signals from the auction will provide a reading of financial institutions’ appetite for Hong Kong government credit.
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