(April 14): Global borrowers are flocking to issue bonds in Hong Kong dollars as the currency’s status as a haven from the conflict in Iran bolsters demand for the securities.
The International Bank for Reconstruction and Development, the World Bank’s lending arm, priced an HK$8 billion five-year note on Monday, the largest Hong Kong dollar-denominated public bond sold by an international issuer.
That followed an HK$6 billion offering from German development bank KfW and a HK$5 billion one from the Asian Development Bank, both in January, and a HK$3 billion deal from the African Development Bank in March. Issuers from outside Hong Kong have sold a record HK$189.8 billion of such notes this year, an increase of almost 150% from the same period in 2025, data compiled by Bloomberg show.
“As Middle East tensions periodically disrupt US dollar credit markets, the Hong Kong dollar stands out as a stable, conflict‑free, US dollar‑linked currency, attracting diversification‑driven demand,” said Lei Zhu, head of Asian fixed income at Fidelity International in Hong Kong.
“Although Hong Kong dollar bonds are not absolutely risk‑free, they should be seen as a defensive safe‑haven asset, which have lower volatility, solid carry and diversification benefits rather than absolute, risk‑free protection,” she said.
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Hong Kong dollar bond issuance is also being propelled by lower funding costs compared to the US currency, which allows for attractive arbitrage opportunities through the so-called carry trade. The global trend toward diversification away from the greenback has increased investor appetite for a range of Hong Kong dollar-denominated assets, further supported by the government’s expanded bond programmes for infrastructure and green finance.
The International Bank for Reconstruction and Development’s bond sale this week attracted more than HK$10.3 billion of orders, with Hong Kong investors accounting for 92% and another 8% allocated to funds from elsewhere in Asia.
“Demand for high-quality Hong Kong dollar-denominated assets from bank investors remains particularly strong, given their historically low loan-to-deposit ratios and the overall stable backdrop of the Hong Kong macroeconomy," said Oliver Greer, global head of medium-term notes at Standard Chartered Bank in Hong Kong.
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