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"To Lock in Some Yields"

The Airport Authority Hong Kong (HKAA) has successfully secured HK$4 billion (equivalent to US$511.82 million) through its inaugural 3.5-year bond issuance in the Hong Kong dollar public market, denoted as HKAA 3.83 07/09/27 Corp.

In a notable move, the coupon rate for the bond was established at 3.83%, surpassing the initial price guidance for potential investors, which stood at 4.2%. The demand from Hong Kong banks and insurance companies was robust, with bids totaling HK$11.1 billion, indicating an oversubscription of 2.77 times.

Despite HKAA holding a commendable AA+ rating from S&P, the yield of 3.83% presents a modest spread of around 50 basis points when compared to the 3-year Hong Kong government bond. While this may not be considered highly attractive, it suggests a trend where investors are seeking to secure yields. This strategic move could be attributed to the anticipation of a potential decrease in US long-term yields to the range of 3.25-3.5% over the next 2-3 years.

The phrase "to lock in some yields" has become a prevalent strategy among long-term investors over the past two months. This approach reflects a proactive stance in capitalizing on current yields, acknowledging the possibility of a future decrease in US long-term yields.

Despite the relatively narrow spread, we remain optimistic about market opportunities. The ongoing trend indicates a nuanced investor approach to navigate evolving interest rate dynamics. We continue to identify and leverage potential opportunities in the market.

For further details or inquiries about investment opportunities, please do not hesitate to contact our team.


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