An additional 40.7 billion Hong Kong dollars in Exchange Fund bills will be offered by the Hong Kong Monetary Authority (HKMA) in tenders on August 4, 11, 18 and 25.
The HKMA said Tuesday that the issuance of additional Exchange Fund paper will be conducted by further expanding the supply of three-month, six-month and 12-month Exchange Fund bills through a corresponding reduction of the aggregate balance.
The three-month Exchange Fund bills to be tendered on August 4, 11, 18 and 25 will be increased by 27 billion Hong Kong dollars.
The six-month Exchange Fund bills to be offered on August 11 and 25, together with the 12-month bills to be offered on August 18, will be expanded by 13.7 billion Hong Kong dollars.
The additional supply of short-dated Exchange Fund paper is designed to meet the strong demand by banks for liquidity management, reflected in the very low yield of the paper.
The monetary base remains fully backed by foreign exchange reserves. Inter-bank 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, according to HKMA.
The aggregate balance is projected to decline by 9 billion Hong Kong dollars on August 5, by 14 billion Hong Kong dollars Aug. 12, 7.7 billion Hong Kong dollars Aug. 19 and 10 billion Hong Kong dollars August 26. (One U.S. dollar equals 7.75 Hong Kong dollars).