Issuance of additional Exchange Fund Bills

Press Releases

29 Sep 2009

Issuance of additional Exchange Fund Bills

The Hong Kong Monetary Authority (HKMA) announced today (Tuesday) that additional Exchange Fund Bills will be offered in the tenders on 6 October, 13 October and 20 October totalling HK$23,100 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 further expanding the supply of 3-month, 6-month and 12-month Exchange Fund bills through a corresponding reduction of the Aggregate Balance.  The 3-month Exchange Fund Bills to be tendered on 6 October, 13 October and 20 October will be increased by a total of HK$6,000 million.  The 6-month Exchange Fund Bills to be offered on 6 October and 20 October, together with the 12-month Exchange Fund Bills to be offered on 13 October, will be expanded by HK$17,100 million in total.  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 will 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$8,700 million on 7 October, by about HK$5,700 million on 14 October and by about HK$8,700 on 21 October.

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.

Annex

For further enquiries, please contact:
Peggy Lo, Manager (Communications), at 2878 1687 or
Natalie Wu, Officer (Communications), at 2878 8246

Hong Kong Monetary Authority
29 September 2009

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Last revision date : 29 September 2009