Issuance of additional Exchange Fund Bills
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The Hong Kong Monetary Authority (HKMA) announced today (September 19) that additional Exchange Fund Bills will be offered in the tenders on September 26 and October 3, 10, 17 and 24 totalling HK$40 billion, 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 Exchange Fund Bills. Specifically, the 3-month Exchange Fund Bills to be offered on September 26 and October 3, 10, 17 and 24 will each be increased by HK$8 billion respectively. Details can be found in the revised issuance schedules 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$8 billion on September 27 and October 4, 11, 18 and 25 respectively.
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, September 19, 2017
Issued at HKT 9:00
Issued at HKT 9:00
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