Competitive tender for 2-year Exchange Fund Notes yields 2.10 percent

The Hong Kong Monetary Authority announced the results of its Exchange Fund Notes tender on 20 February 2026. HK$1,200 million of 2-year notes were allotted at an average yield of 2.10 percent.

Robust demand for 2-year notes

The tender for the 2-year Exchange Fund Notes, identified as Issue 02Y2802, saw substantial investor interest.

A total of HK$7,040 million was applied for, significantly exceeding the HK$1,200 million amount allotted.

This oversubscription indicates strong demand for Hong Kong dollar-denominated debt instruments.

The notes, issued on 23 February 2026 with a maturity date of 23 February 2028, carry a coupon of 2.23% per annum.

In the competitive tender, both the average and lowest accepted prices stood at 100.28, corresponding to a yield of 2.10 percent.

The pro rata ratio, reflecting the average percentage of allotment at the lowest accepted price level, was approximately 40 percent.

The overall average tender price was 100.14, resulting in an average yield of 2.17 percent.

Exchange Fund Notes: A market benchmark

Exchange Fund Notes are debt securities issued by the Hong Kong Monetary Authority (HKMA) on behalf of the Hong Kong Special Administrative Region Government.

Their primary purpose is to manage liquidity in the banking system and to provide a benchmark yield curve for the development of the local debt market.

These notes are highly liquid and serve as an important tool for the HKMA in conducting its monetary operations.

The non-competitive tender segment, designed to facilitate participation from smaller investors, recorded no applications or allotments for this particular issue.

This suggests that the competitive tender remains the dominant channel for participation.

The consistent issuance of these notes contributes to the depth and efficiency of Hong Kong's financial markets.

A routine but telling issuance

This tender, while a routine operational announcement, underscores the HKMA's ongoing commitment to liquidity management and providing a stable benchmark for the Hong Kong dollar debt market.

The significant oversubscription in the competitive segment highlights robust investor appetite for safe-haven assets amidst global uncertainties.

The absence of non-competitive bids suggests that smaller participants may find direct participation less appealing or are sufficiently served by secondary markets.