Hong Kong debt boom has room to run

Cathay Pacific Airways

06/05/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Ka Sing Chan

HONG KONG, May 6 (Reuters Breakingviews) - A raft of mega debt deals in Hong Kong underscores how cheaper funding costs and investors looking for a U.S. dollar hedge are spurring activity in the city's local-currency bond market. It's a well-timed opportunity for Chief Executive John Lee's government to issue more debt for ambitious new projects.

In the past month, the Hong Kong Airport Authority, train operator MTR Corp 0066.HK and carrier Cathay Pacific Airways 0293.HK raised some HK$40 billion ($5.1 billion) combined. Total bond issuance hit $13 billion in the first four months of the year, 85% of last year's record total, according to Dealogic. Foreign borrowers are also tapping the appeal of the Hong Kong dollar: they have sold HK$177 billion in local-currency notes and short-term debt instruments so far this year, FSMOne data shows.

Volatility in the U.S. bond market has pushed capital inflows into Hong Kong, where the currency is pegged to the greenback. The increased liquidity has lowered the 12‑month interbank rate to about 2.9% last month from 4% a year earlier. That allowed the Hong Kong Airport Authority to price the 10‑year tranche of its HK$19 billion issuance at just 3.38%, nearly 100 basis points below U.S. Treasuries. The landmark sale, the largest Hong Kong‑dollar debt sale on record, was almost three times covered within hours, highlighting growing global demand for Asian currencies as more investors seek to hedge their dollar exposure.

For Lee, it's an ideal moment to tap global demand. The city's GDP growth hit 5.9% in the first quarter, the strongest pace in five years, partly thanks to "robust cross-boundary financial activities". Last year, the government issued just HK$93 billion of local‑currency bonds, accounting for less than 2% of the total. There is ample room to do more. Officials in Beijing and Hong Kong have been talking up the Northern Metropolis initiative, a 30,000‑hectare project neighbouring Shenzhen billed as a future finance and technology hub. Initial estimates for the core infrastructure and development costs have topped HK$224 billion alone. If investors at the moment cannot get enough of Hong Kong‑dollar bonds, Lee has every reason to offer them more.

CONTEXT NEWS

Hong Kong dollar bond issuance has topped $13 billion as of April 30, or 85% of the 2025 total, according to Dealogic.

As of April 30, foreign issuers have sold up to HK$177 billion of Hong Kong-dollar debt, including instruments such as short-term notes, compared with HK$225 billion for the entire 2025, data from investment platform FSMOne show.

The Hong Kong government sold a total of HK$93 billion Hong Kong dollar bonds in 2025, or 1.6% of total issuance of local currency debt securities, according to data from the Hong Kong Monetary Authority.

The Hong Kong dollar bond market is booming https://www.reuters.com/graphics/BRV-BRV/lgpdgekbqvo/chart.png

(Editing by Robyn Mak; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))