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Hong Kong's latest Silver Bonds programme has seen record-breaking demand from elderly investors seeking higher returns than bank deposits. During the offering period, which concluded on Friday, 478,000 bids were submitted for HK$119.8 billion (US$15.28 billion) worth of bonds, marking a 22% increase in value and a 28% jump in the number of applicants compared to last year's record-breaking offering.

The government is expected to raise the final issuance to HK$55 billion, up from the original HK$50 billion allocation. The Hong Kong Monetary Authority will reveal the final allotment results on September 11, with the bonds scheduled for issuance on September 15. The government raised the guaranteed coupon rate for the 11th batch of Silver Bonds to 4.25%, up from 3.85% last year and 4% in 2024.

This increase was made in anticipation of the upcoming Federal Open Market Committee (FOMC) decision on September 17. Around 60% of traders anticipate a 0.25 percentage point rate increase in the US, while 40% expect no rate change. Hong Kong's policy of aligning its interest rates with the US due to the local currency's peg to the US dollar means any rate hike in the US will prompt a corresponding rise in Hong Kong.

HSBC and Bank of China (Hong Kong) are the two managers for the offering, alongside other banks such as ICBC and China Citic Bank International, all of which have reported strong investor interest since the offering period began on August 21. Winnie Ng, head of wealth and premier solutions at HSBC Hong Kong, explained that investors remain attracted to Silver Bonds for their predictable income stream and safe-haven qualities, particularly in the current market volatility and focus on interest rates.

HSBC witnessed a 23% increase in subscription value and a 31% rise in applicant numbers compared to last year's offering, both hitting record highs. More than half of the applications were submitted online, with a quarter of applicants new to Silver Bonds. Bright Smart Securities, a leading local retail broker, also experienced a surge in Silver Bond subscriptions, driven by investors shifting their bank deposits due to market volatility and underwhelming initial public offerings.