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Press Releases

Tender of a tap issue of 91-Day Exchange Fund Bills to be held on 11 January 2008

The Hong Kong Monetary Authority (HKMA) announced today (Friday) that a tender for a tap issue of 91-Day Exchange Fund Bills, totalling HK$6,000 million, will be held on 11 January 2008 for settlement on 14 January 2008. The Bills will be on offer solely for competitive tenders and will mature on 14 April 2008.

Tap issues are ad hoc issues of Exchange Fund paper in addition to the regular tenders. The launch of the tap issue is primarily to address an increase in demand for Exchange Fund paper arising from the banks' intraday liquidity needs. On the settlement day, the Aggregate Balance will be reduced by about HK$6,000 million.

The issuance of new Exchange Fund paper is in line with the three refinements to the Linked Exchange Rate system introduced in May 2005. It is consistent with Currency Board principles since the additional issuance of Exchange Fund paper simply represents a shift of funds within the Monetary Base from the Aggregate Balance to the Exchange Fund paper. The Monetary Base remains fully backed by foreign reserves.

Demand for the short-dated Exchange Fund paper for intraday liquidity to meet settlement obligations through the Real Time Gross Settlement system has increased in recent months, alongside the increase in equity-market transactions. The volume of intraday repos of Exchange Fund paper has been rising, and has sometimes exceeded 80% of the Exchange Fund paper held by banks. However, the total issuance of Exchange Fund paper has been virtually unchanged since 1998. The strong demand for the paper is reflected in part in the widened spread for short-dated Exchange Fund paper against the local interbank interest rates, which exceeded 400 basis points at one time.

"The issuance of additional Exchange Fund paper will help meet the demand for Exchange Fund paper and satisfy banks' intraday liquidity needs," Mr Joseph Yam, the Chief Executive of the HKMA, said.

The forecast change in the Aggregate Balance arising from the tap issue is published on the HKMA's website, the Reuters screen (HKMAOOC) and Bloomberg.

The revised issuance schedule is attached in the annex. Members of the public who wish to tender for the Bills may do so through any of the Eligible Market Makers on the published list, which can be obtained from the HKMA at 55/F, two International Finance Centre, 8 Finance Street, Central, Hong Kong (telephone 2878 1465), or from the HKMA's website at http://www.hkma.gov.hk. Each tender must be for an amount of HK$500,000 or integral multiples thereof.

The tender results will be published on the HKMA's website, the Reuters screen (HKMAOOE) and Bloomberg.

For details about the Exchange Fund Bills Issuance Programme, please refer to "Information Memorandum of Exchange Fund Bills Programme". This document can also be found on the HKMA website (http://www.hkma.gov.hk).

Annex

For further enquiries, please contact:
Thomas Chan, Senior Manager (Press), at 2878 1480 or
Peggy Lo, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
4 January 2008

 
Last revision date: 1 August 2011
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