The Hong Kong Mortgage Corporation ( HKMC ) has priced its inaugural digital bonds totalling HK$12 billion ( US$1.53 billion ) equivalent, the largest-ever issuance of its kind globally to date.

The issuance, part of the company’s US$30 billion medium-term note programme, comprises a two-year tranche amounting to HK$6 billion, a five-year tranche totalling HK$2.5 billion, and 3 billion yuan ( US$442.7 million ) bonds for three years.

The landmark transaction sees the HKMC becoming the first public sector entity in Hong Kong to issue digital bonds. Also, the five-year tranche represents the longest tenor ever for a Hong Kond dollar-denominated digital bond, setting a new benchmark in the HKD bond market. It attracted a combined peak order book of around HK$24 billion equivalent from more than 100 accounts.

The digital bonds are digitally created on a distributed ledger technology platform operated by the Central Moneymarkets Unit ( CMU ), which also serves as the clearing and settlement system for the bonds.

Greater operational efficiency

Issuing the bonds in a digitally native format results in greater operational efficiency, providing investors the option to access via the existing CMU infrastructure and linkage to Euroclear and Clearstream, and successfully shortening the settlement cycle from five to three business days.

Howard Lee, deputy chief executive of the Hong Kong Monetary Authority and executive director of the HKMC, comments: “By launching tokenized fixed income products and driving market innovation, the HKMC demonstrates its unwavering support for the HKSAR government’s strategic roadmap to cement Hong Kong's position as a global fixed income and currency hub.  This landmark digital bond issuance helps deepen Hong Kong’s digital asset ecosystem and accelerate the adoption of tokenization technology in the fixed income market, inspiring a wider range of issuers, investors, intermediaries and other industry stakeholders to embrace this innovative financial instrument.”

HKMC executive director and chief executive officer Colin Pou adds: “Through our effective pre-marketing exercises and roadshows to the investing community, the inaugural digital bonds issued by the HKMC were priced amidst strong market reception.  This milestone highlights the growing participation from arranging banks and first-time digital bond investors.  It reinforces Hong Kong’s distinctive role in bridging traditional finance with the digital asset era.  Moving forward, the HKMC will continue to leverage its strengths to further develop the local bond market.”

A total of 16 local and international financial institutions supported the digital bond issuance, including as joint global coordinators, joint bookrunners, and joint lead managers.

Global law firm Clifford Chance advised the HKMC on the deal. Lead partner Mark Chan led the transaction with support from counsel Torrance Shi, senior associate Christine Chan, and trainee solicitor Oliver Lai.