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The following is issued on behalf of the Hong Kong Monetary Authority:
The Hong Kong Monetary Authority (HKMA) announced today (March 12) that additional Exchange Fund Bills will be offered in the tenders on March 19, March 26, April 2 and April 9, totaling HK$20,000 million, to meet the increased demand for the paper by banks given the abundance of liquidity in the banking system. 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 issuance of additional Exchange Fund paper will be conducted by expanding the supply of 3-month and 6-month Exchange Fund Bills through tenders on March 19, March 26, April 2 and April 9. The 3-month and 6-month Exchange Fund Bills will be increased by HK$12,000 million and HK$8,000 million, respectively. Details can be found in the revised issuance schedule for Exchange Fund Bills and Notes (Annex).
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 Aggregate Balance is projected to decline by about HK$4,000 million on March 20, by about HK$5,000 million each on March 27 and April 3, and by about HK$6,000 million on April 10.
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.
Ends/Tuesday, March 12, 2013
Issued at HKT 13:00
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