Hong Kong’s iBonds are Selling like Hotcakes

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Hong Kong’s iBonds Selling like Hotcakes

I would like to point out that Steve Jobs’ Apple Inc. is highly reputable and deserves its predominant popularity spot but the past year, has left this legendary company over commercialized so, before you even begin to think that this post will take you through this over treaded post, I would like to clear the air and point out we are not talking about Apple Inc’s ‘iBonds’, rather, we are on a more interesting topic – inflation bonds issued by the Hong Kong government.

June 4 2013 marked the day when over a quarter of Hong Kong’s nation made their way to their nearest banks in order to grab ahold of the HKD10 billion Hong Kong  (US$1.29 million) iBond shares that had just been launched. As the saying goes, a stitch in time saves nine – the government had initially tied iBonds to the country’s consumer prices; why you wonder? To insure that all debt holders were in one way or another protected from the somewhat unpredictable ROI’s .

The Hong Kong Monetary Authority claims that over the past 3 years, investors have been digging in their claws to over HK$40 billion as this bond offers spectacular chances for diversification. Funny to investors is the fact that despite the popularity of iBonds, investors are still against the US 10year Treasury Inflation-Protected Securities, which you would think were more or less the same thing.

With the escalating rental fees it has become apparent that supermarket purchases will also skyrocket and this is portrayed by the shocking 4.0 percent inflation rate posed in April, the country was thereby forced to import food from China, setting the country a notch back. Federal Reserve on the other hand has prepared for a 2.46 percent breakeven inflation rate which indicatively is less rewarding than the latter, so the citizens of Hong Kong have got the right to shun this seemingly deluding TIPS offer. What’s more, any investor, if offered a 1 percent guaranteed interest rate no matter the outcome then that is a nudge enough to invest in these near zero percent interest rates. So to the people of Hong Kong, iBonds are the way to go.

http://blogs.wsj.com/moneybeat/2013/06/14/hong-kongers-snap-up-ibonds/