Surge in Hong Kong dollar bonds to continue after record US$42 billion year
Hong Kong dollar bond issuance is poised to expand, following a record run of offerings, as easing local interest rates attract more issuers while a global diversification trend persists, according to analysts.
Total issuance in the city’s currency reached a record HK$331 billion (US$42.6 billion) so far this year, nearly 37 per cent higher than 2024’s full-year total of HK$242 billion.
“The Hong Kong dollar bond market will continue to grow over the long term, supported by structural shifts,” said Oliver Greer, global head of medium-term notes at Standard Chartered.
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Amid a global shift to diversify away from the US dollar, the Hong Kong dollar emerged as a logical choice for Asian investors, supported by its long-standing US dollar peg and a deep, liquid market underpinned by a clear legal and capital framework, Greer said. The city’s low inflation also translated into higher real returns for bond investors, he added.
Many issuers were broadening their funding mix as US dollar rates remained elevated, said Terrence Pang, portfolio manager at Fidelity International.
“The Hong Kong dollar has offered more competitive all-in costs, particularly for borrowers with natural Hong Kong dollar needs or balance-sheet alignment,” he said.
The Hong Kong dollar bond market has expanded steadily in recent years, but the latest surge was driven by the exceptionally low Hong Kong interbank offered rate (Hibor) earlier this year, which sharply reduced funding costs.
Although the rate gap between Hong Kong dollars and US dollars narrowed recently, Hong Kong dollar interest rates were still likely to stay below US dollar levels because of the city’s lower inflation, Greer said.
“We forecast a continued decline in Hibor throughout 2026, in tandem with the Federal Reserve’s aggressive rate-cutting trajectory,” said Carlos Casanova, an economist at Swiss private bank UBP. “We project a reduction of at least 100 basis points.”
Additionally, the Hong Kong dollar public bond market saw its first international issuer this year, issuing a so-called wonton bond, named after a type of Chinese dumpling.
Oliver Greer, global head of medium-term notes at Standard Chartered, pictured on November 27, 2025. Photo: Jonathan Wong alt=Oliver Greer, global head of medium-term notes at Standard Chartered, pictured on November 27, 2025. Photo: Jonathan Wong>
Foreign entities issuing public bonds in Hong Kong dollars is a departure from their typical practice of using private channels to tap the local currency. The Asian Infrastructure Investment Bank set the precedent by issuing a HK$4 billion three-year bond in February.
The transaction list grew to eight this year, with Korea Expressway raising a HK$2 billion note last week as the latest and first corporate wonton-bond issuer.
“After years of virtually no international public Hong Kong dollar deals, one transaction quickly led to seven more in a year,” Greer said. “The market has matured to a point where international issuers choose to come here because pricing is more attractive and the size is significant.”
Issuance of wonton bonds this year totalled HK$28.9 billion. It could grow further next year as more supranationals and agencies debut or revisit the market, according to analysts.
“Many supranationals and agencies now see this as a long-term market where they plan to be repeat borrowers,” said Greer. “In 2026, we will likely see a number of debut international issuers doing Hong Kong dollar public deals, and the pipeline looks healthy.”
The outlook for Hong Kong dollar bonds next year was “constructive”, supported by fiscal and policy measures that continue to drive funding needs from government, quasi-sovereign and other high-grade local issuers, Pang said, pointing to infrastructure initiatives like the Northern Metropolis.
Local institutional investors tended to be “sticky” too, he added.
“Banks, insurers, [Mandatory Provident Fund] schemes and other long-term buy-and-hold types of investors provided support in the primary and secondary markets,” he said. “Loan-to-deposit ratios have fallen meaningfully since 2022, increasing banks’ and insurers’ appetite for high-quality carry assets.”
As mainland Chinese banks’ offshore balance sheets grew, Hong Kong became a natural funding centre and reinforced the case for allocating a larger share to Hong Kong dollars, Greer said.
Overall, the structural backdrop, including a rate-cutting cycle and tight credit spreads – an indicator that investors see low risk and demand little extra yield over safer government bonds – was expected to support Hong Kong dollar bond issuance, Greer said.
“If this supportive risk sentiment persists and the Fed delivers the expected rate cuts, 2026 is likely to be another strong year for Hong Kong dollar bond issuance,” he said.
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