The Mortgage Corporation has launched a debut issue under the Debt Issuance Programme for $100-million, two-year Composite Interest Rate Notes.

The issue, arranged and managed by the Industrial & Commercial Bank of China (Asia) was marked by a signing ceremony today.

The two-year notes carry a monthly coupon of Composite Interest Rate plus 1.10% per annum and will be settled and cleared through the Central Moneymarkets Unit on March 24.

The Composite Interest Rate reflects the banks' average cost of funds and is compiled monthly by the Monetary Authority on the basis of statistical data from retail banks.

Weighted average

It is computed on the basis of the weighted average of all Hong Kong dollar interest-bearing liabilities of retail banks. These include deposits from customers, amounts due to banks, negotiable certificates of deposit, other debt instruments and Hong Kong dollar non-interest bearing demand deposits. 

Starting February, the Composite Interest Rate is fixed on a monthly basis and will be announced in the Monthly Statistical Bulletin on the authority's website.

The corporation's Chief Executive Officer James Lau said the debut issue is another initiative by the corporation to promote product diversification in the Hong Kong debt market, adding Composite Interest Rate notes should be of interest to investors who prefer bond yields that are more stable than HIBOR.

Mortgage products

The corporation has also liaised with banks to explore the feasibility of introducing Composite Interest Rate mortgage products.

The Bank of East Asia, CITIC Ka Wah Bank, DBS Bank (Hong Kong) and Hang Seng Bank have agreed in principle to launch mortgage loan products indexed on the Composite Interest Rate.

Mr Lau said the launch of Composite Interest Rate mortgage products will provide more consumer choice and will be beneficial to the development of the mortgage financing market.