Darius Baruo
Jan 29, 2026 11:01
HKMA announces February 4 tender for floating rate notes tied to overnight index average, with proceeds funding infrastructure projects.
The Hong Kong Monetary Authority is tapping bond markets next week with a HK$1.5 billion offering of floating rate notes, giving institutional investors exposure to the city’s overnight lending benchmark amid elevated interest rate conditions.
The tender, scheduled for February 4 with settlement the following day, will issue 1-year notes under Hong Kong’s Infrastructure Bond Programme. Interest payments are indexed to HONIA—the Hong Kong Dollar Overnight Index Average—plus whatever spread clears at auction, paid quarterly.
Why HONIA Matters Right Now
The timing is notable. Recent market data shows deposit rates in Hong Kong exceeding 7%, pushing lending costs higher across the board. HONIA, which reflects the actual cost of overnight unsecured interbank lending, has become increasingly relevant as global markets shift away from LIBOR-style benchmarks toward transaction-based reference rates.
For context, HIBOR—Hong Kong’s traditional interbank rate—surged during August 2025, creating volatility in floating-rate instruments. HONIA-linked products offer an alternative that tracks real overnight transactions rather than bank submissions.
Tender Details
The notes carry stock code 4200 and will mature February 5, 2027. Minimum tender size is HK$50,000, accessible only through Primary Dealers appointed under the programme. Interest is floored at zero regardless of how HONIA moves—a protection that matters if rates somehow turned negative.
Quarterly interest payments fall on May 7, August 7, November 9, and February 9, 2027. Trading on the Hong Kong Stock Exchange begins February 6.
Where the Money Goes
Proceeds feed directly into infrastructure projects under the government’s published framework—a distinction from general borrowing. This gives the issuance a specific use-of-proceeds mandate that may appeal to investors with ESG or impact mandates.
Tender results drop by 3:00 pm Hong Kong time on February 4, available through Bloomberg (GBHK), Refinitiv, and the HKMA website. With rates elevated and infrastructure spending in focus, demand signals from this auction will offer a read on institutional appetite for Hong Kong government credit.
Image source: Shutterstock
