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The following is issued on behalf of the Hong Kong Monetary Authority:
The Hong Kong Monetary Authority (HKMA) announced today (May 12) that additional Exchange Fund Bills will be offered in the tenders on May 19, May 26 and June 2, totalling HK$24,100 million, to meet the increased demand for the paper by banks.
The issuance of additional Exchange Fund paper will be conducted by expanding the supply of 3-month, 6-month and 12-month Exchange Fund Bills. The 3-month Exchange Fund Bills to be tendered on May 19, May 26 and June 2 will be increased by a total of HK$19,000 million. The 6-month Exchange Fund Bills to be offered on May 19 and June 2, together with the 12-month Exchange Fund Bills to be offered on May 26, will be expanded by HK$5,100 million in total. Details can be found in the revised issuance schedule for Exchange Fund Bills and Notes (Annex).
The additional supply of short-dated Exchange Fund paper is designed to meet the strong demand for Exchange Fund paper by banks for liquidity management. The strong demand for the paper is reflected in the very low yield of short-dated Exchange Fund paper.
The increase in the supply of Exchange Fund Bills is consistent with Currency Board principles, since the additional issuance simply represents a change in the composition of the Monetary Base, with a shift from the Aggregate Balance to Exchange Fund paper. The Monetary Base remains fully backed by foreign exchange reserves. Interbank liquidity is expected to remain abundant after the issuance of additional Exchange Fund Bills, which is not expected to have a significant impact on liquidity conditions and interest rates. The HKMA will monitor the situation closely and stand ready to take appropriate action to maintain adequate liquidity within the system if necessary.
The Aggregate Balance is projected to decline by about HK$6,700 million on both May 20 and 27, and by about HK$10,700 million on June 3.
The forecast change in the Aggregate Balance arising from the additional issuance of Exchange Fund paper is published on the HKMA website, the Reuters screen (HKMAOOC) and Bloomberg.
For further enquiries, please contact:
Thomas Chan, Communications Chief, at 2878 1480 or
Peggy Lo, Manager (Communications), at 2878 1687
Ends/Tuesday, May 12, 2009
Issued at HKT 11:46
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