HKMA sells US$5b of Exchange Fund Bills; says unrelated to currency slide
The HKMA says the bills to be issued between August 22 and September 19, were mainly to meet demand amid abundant liquidity
The Hong Kong Monetary Authority said it would sell HK$40 billion (US$5.11 billion) of Exchange Fund Bills, halting the Hong Kong dollar’s march toward a 10-year low.
The de facto central bank said the bills would be issued between August 22 and September 19 to satisfy strong demand from banks, given the abundance of liquidity in the financial system. The offer had nothing to do with the recent weakening of the Hong Kong dollar, which is not a concern to the HKMA, it said.
“Banks’ demand for such paper has been strong in recent months, mainly for liquidity management purposes. The HKMA considers the additional issuances appropriate amidst the current market environment,” the HKMA said, adding that the search for yield comes as banks’ liquidity coverage ratio will step up to 90 per cent in 2018 and 100 per cent in 2019, under the phase-in arrangement of the Basel liquidity requirements.
As a result of the HKMA’s Exchange Fund Bill issuance, Hong Kong’s aggregate balance, which represents the level of interbank liquidity, is projected to decline from the current HK$259.5 billion level to HK$219.5 billion in September.
The HKMA previously reduced the aggregate balance for a period from a peak of HK$426 billion in November 2015 to HK$259.5 billion in September 2016, but it has been held steady since.
