Hong Kong launched an inflation link bond called iBond to retail investors on 28th July 2011.
The iBond is listed on the Hong Kong Stock Exchange and pays an interest rate which is linked to the HK average annual inflation.
The minimum investment is HK$10,000.
The tax-free government bond pays investors at least one per cent interest every six months and matures in 2014.
If inflation is higher than 1 per cent, then the bond will pay a rate linked to the composite consumer price index (CPI).
Demand for the iBond was good, with the entire HK$10 billion offering taken up. The iBond closed at a price of HK$106.70 on the first day of trading, up 6.7% for those who had invested.
For the purpose of trading, accrued interest is involved when trading iBonds. This means that the buyer of iBond has to pay to the seller the purchase price plus an amount equal to the interest accrued from the last interest payment date to the settlement date.
It will be good if the Singapore government will follow suit and issue something similar.
