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    Bonds and Certificates of Deposit
    Important Risk Warning
    The information in this webpage is provided for reference only and shall not be considered as investment advice. It does not constitute any offer or solicitation of offer to subscribe, transact or redeem any investment product. If you have any doubt, you should seek independent professional advice.
    Bonds and Certificates of Deposit (CDs) are investment products. The investment decision is yours but you should not invest in a bond/CD unless the intermediary who sells it to you has explained to you that the bond/CD is suitable to you having regard to your financial situation, investment experience and investment objectives. Your intermediary is under a duty to assure that you understand the nature and risks of this product, and that you have sufficient net worth to be able to assume the risks and bear the potential losses of trading in this product.
    Bonds are not deposits and should not be treated as substitute for conventional time deposits.
    Certificate of Deposit is not a protected deposit and is not protected by the Deposit Protection Scheme in Hong Kong.
    Investors who purchase bonds/CDs are exposed to the credit risk of the issuer and guarantor (if any) of the bonds/CDs. There is no assurance of protection against a default by the issuer/guarantor in respect of the repayment obligations. In the worst case scenario, any failure by the issuer and the guarantor (if any) to perform their respective obligations under the bonds/CDs when due may result in a total loss of all of your investment.
    Renminbi (RMB) is not a freely convertible currency. As such, investors trading bonds and/or CDs denominated in RMB are subject to additional risks (such as currency risk).
    The above is not an exhaustive list of risk factors. Please refer to the section on “Risk Factors” in the relevant “Bond / Certificate of Deposit Trading Services” Factsheet to understand other risk factors applicable to bonds and CDs.

    Bonds and Certificates of Deposit Services



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    Provide Stable Income Stream
    Investing in bonds or CDs and holding them in long term offer steady income stream to investors.
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    Predictable Return
    In addition to providing stable income stream, investing in bonds and CDs can provide predictable return, with relatively low volatility.
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    Risk Diversification
    Inclusion of bonds and/or CDs can diversify risk and offer relative stability to a portfolio.
    • Bond Investment and Certificates of Deposit Trading Services
    • A wide variety of bonds are available for selection. Types of bonds for investment include government bonds, local quasi-government bonds, supranational bonds and corporate bonds.
    • Certificates of Deposit (CDs) are issued by financial institutions such as banks.
    • Bonds and CDs are available in major currencies including Renminbi.
    • Tenor ranged from 1 to 10 years for bond investment and from 3 months to 3 years for CD investment are available.
    • Minimum investment amount is as low as HK$50,000[1] for bonds and US$50,000 (or equivalent) for CDs.
    • No charges for Transfer-in and Custodian Fee[2]
    Note:
    [1]  This only applies to retail bonds issued by the Government of the HKSAR, for example, inflation-linked bond, Silver Bond and sovereign bonds issued by Ministry of Finance of the PRC. Please contact the branches for the minimum investment amount for other secondary market bonds.
    [2]  Fee waiver for safe custody if account only hold bonds and/or CDs during that month. All charges are subject to revision. The charges for other specific services will be advised at the time the services are offered or on request.

    Important Notice: For the product risk rating information of Bonds and Certificates of Deposit: Please click View detail [PDF]

    What are Bonds/CDs ?
    Product Features
    Bonds/CDs services
    What are Bonds?
    Bonds are debt instruments issued by governments, corporations or other issuers to bondholders. There are various types of bonds on the market including fixed rate bonds, floating rate bonds, zero coupon bonds and convertible bonds. Bondholders are effectively lending money to the bond issuer in return for the bond issuer’s promise to make regular interest payments over the life of the bond and repayment of principal at maturity.
    Hang Seng Bank currently offers bonds denominated in the major currencies issued by governments (including the PRC government, the HKSAR government), local quasigovernment bodies, supranational organizations and corporations. Hang Seng Bank also offers a wide selection of bonds with different investment tenors, ranged from one to ten years with various benchmark yields to suit different investors’ needs. The minimum investment amount can be as low as HKD50,000[1].
    What are Certificates of Deposit?
    CD is a type of debt instrument similar to bond. CDs are issued by financial institutions such as banks. CD holders are effectively lending money to the CD issuers in return for the CD issuer’s promise to repay the principal and an interest payment at maturity.
    Hang Seng Bank offers investors with different types of CDs with various tenors and currency denominations to suit different investment objectives.
    The trading price of a bond may fluctuate based on the prevailing market conditions (such as prevailing market rates, any change in the credit rating of the bond and the supply and demand of similar bonds in the market), and may not be in line with the expectations of bondholders.
    Illustrative Example
    Miss. Chin invested US$98,000 in a fixed rate corporate bond at a market price of 98% at the end of 2012. The face value of the bond was US$100,000. The bond has the following features:
    Coupon Rate: 3% p.a.
    Maturity Date: December 15, 2018
    Scenario 1
    Scenario 2
    Scenario 3
    Scenario 1: Miss. Chin holds the bond until maturity
    Miss. Chin will receive an interest payment of US$3,000 (US$100,000 x 3%) every year before the maturity. On December 15, 2018, Miss. Chin will receive the final coupon payment of US$3,000 plus US$100,000 principal amount.
    Scenario 2: If Miss. Chin sells the bond with market price = 102%
    If Miss. Chin sells the bond in June 2013 and the market price of the bond at that time is 102%, Miss. Chin will receive an accrued coupon payment of US$1,500 plus US$102,000 (102/100 x US$100,000) for the sale of the bond.
    Scenario 3: Issuer defaults
    If the issuer becomes insolvent and defaults on its obligations under the bond on or before 15 December 2015, Miss. Chin will not receive any interest amount since last coupon payment date and in the worst case, Miss. Chin may not receive the face value of the bond at maturity.
    Government and Corporate Bonds
    Credit Rating
    Terminology
    Government and Corporate Bonds
    Categories of bonds are classified by the nature of issuers. Government bond is used to describe debt securities issued by a government, e.g. Treasury bills, notes and bonds. Most governments issue bonds to help regulate the money supply and pay off national debts.
    Corporate bonds are debt securities issued by private or public corporations. Investors usually consider corporate bonds as a safer investment than company's shares, this is because the holders of corporate bonds have higher priority over shareholders with regard to the corporation's assets in case of liquidation.
    Credit Rating
    A bond’s credit rating indicates its credit quality and the issuer’s financial ability to repay the bond’s interest payments and/or principal at maturity. Credit rating agencies (e.g. Moody’s and Standard & Poor’s) may assign credit ratings to the bonds themselves or to the issuer. Investors should be aware that credit ratings are only the opinion of a particular credit agency and may change from time to time.
      Moody's Standard & Poor's What do the Ratings mean?
    Investment Grade Aaa AAA Highest quality
    Aa1,Aa2,Aa3 AA+,AA,AA- High quality
    A1,A2,A3 A+,A,A- Upper-medium quality
    Baa1,Baa2,Baa3 BBB+,BBB,BBB- Medium quality
    Non-Investment Grade Ba BB Speculative
    B,Caa B,CCC,CC Highly speculative
    Ca,C D Default
    Moody's applies a numerical indicator 1,2 and 3 in each generic rating. For examples, A1 is better than A2. Standard & Poor's use a plus or minus indicator. For example, A+ is better than A, and A is better than A-.
    Ratings affect a bond's yield. The lower the rating, the higher will be the yields as investors will need extra incentive to compensate for taking on higher risk.
    Investment grade bonds are of relatively high quality with a minimum S&P rating of BBB- or a minimum Moody's rating of Baa3.
    Non-investment grade bonds, on the other hand, are of lower quality, and carry a higher risk of default. S&P rates these BB+ and below, while Moody's rates them Ba1 and below.
    Credit ratings opinions are
    (i) not intended to be a prognosis or recommendation,
    (ii) not necessarily an indication of liquidity or volatility,
    (iii) may be downgraded if the credit quality of the relevant entity or asset or obligation declines, and
    (iv) is only an opinion of a particular credit agency and may change from time to time.

    Credit ratings are primarily intended to provide investors and market participants with information about the relative credit risk of the bonds and its issuers. Investors should consult their intermediary to obtain the latest credit rating of a particular bond.
    Terminology
    Issuer
    This is the party that borrows the money. Bonds are commonly classified by the nature of their issuer, for example, corporate bonds (issued by companies or their subsidiaries), government bonds (such as Exchange Fund Notes issued by the Hong Kong Monetary Authority), and bonds issued by supranational organizations (like the World Bank).
    Principal
    This is also called the par value or face value. It is the amount repaid to the bondholder when the bond matures.
    Coupon rate
    This is the rate at which the issuer pays interest on the principal to the bondholder each year. Interest payments are normally made at regular intervals, e.g. annually, semi-annually, quarterly. For Certificate of Deposit, the interest payment is usually paid at maturity. The coupon rate can be fixed, where it does not change over the term of the bond. It can be floating, where it is reset periodically according to a predetermined benchmark, such as HIBOR plus a spread. The coupon rate can even be zero. A zero-coupon bond is usually sold at a price below its principal. The bondholder's return is then the difference between the purchase price and the principal repaid on maturity.
    Coupon Frequency
    The regular intervals that interest payments are normally made, e.g. annually, semi-annually, quarterly.
    Term
    This is the life of the bond, i.e. the period (usually a number of years) over which the issuer has promised to meet its obligations under the bond. Some bonds can be "perpetual" in the sense that they do not have a fixed maturity date.
    Guarantor
    Some bonds are guaranteed by a third party called a guarantor. If the issuer defaults, the guarantor agrees to repay the principal and/or interest to the bondholder.
    Maturity date
    Bondholder will receive the principal and accrued interest on this date.
    Bond yields
    Bond yield is the amount of return an investor realises on a bond. There are several types of bond yield measures. Actual yield of bonds will depend on the subscription or purchase price and may be higher or lower than the specified coupon rate. Current yield, yield to maturity (YTM), and yield to call (YTC) are the three commonly used bond yield measures.
    Current yield
    The annualised rate of return calculated by simply dividing the current annual coupon of a bond by its price
    Yield to maturity
    The rate of return anticipated on a bond if it is held until maturity. YTM is usually expressed as an annual rate of return.
    Yield to call
    The rate of return of a callable bond which is held until the call date. The yield will only become valid if the bond is called before maturity.

    To learn more about Bonds, please visit "The Chin Family" website

    Open Securities Account
    Fee Schedule
    Bond/CD List
    Related Documents
    Open Securities Account
    Existing Customer New Customer
    The costs and charges of investing in bonds/CDs
    The minimum amount for investing in Bonds is HK$50,000[1], for CDs is US$50,000 (or equivalent), depending on the type of bond/CD and the respective market prices at the point of trading. Handling fees are charged for the following services:
    Service
    		 Charges
    Buy / Sell bonds or CDs/Redemption at maturity
    		 Nil[3]
    Safe custody (account only holds bonds and/or CDs during that month)
    		 Nil[3]
    Transfer in from other custodian Nil[3]
    Transfer out to other custodian
    		 HKD500 / instruction[3]
    [3]All charges are subject to revision. The charges for other specific services will be advised at the time the services are offered or upon request.

    Certificates of Deposit


    Secondary Market Bonds


    Note:
    [4] Product Risk Level:
    1 = Low risk
    Products with this risk level may be suitable for an investor who is very risk averse, and for whom preserving capital is the most important.
    2 = Low to Medium risk
    Products with this risk level may be suitable for an investor who wants to gain the potential for some real capital growth while he/she understands that he/she needs to take a small amount of risk with the capital invested.
    3 = Medium risk
    Products with this risk level may be suitable for an investor who is willing to tolerate a moderate amount of risk to see his/her money grow.
    4 = Medium to High risk
    Products with this risk level may be suitable for an investor who wants to gain the potential of greater real capital growth. He/she understands that to have this potential he/she needs to take a high amount of risk with the capital invested.
    5 = High risk
    Products with this risk level may be suitable for an investor who wants to have very significant real capital growth. He/she understands that to have this he/she needs to take a very high amount of risk with the capital invested.

    Not all of the Bonds/CDs that are offered by the Bank are shown on the Bank’s Product Page. The list is generally updated on the first business day of each month based on market liquidity and availability of the Bonds/CDs. Not all the Bonds/CDs products are made available here. Please visit our branches for all Bonds/CDs offered by the Bank.

    The above information is for reference only and they are neither a recommendation, an offer to sell nor a solicitation of an offer to purchase any investment. Information contained in the list of Bonds/CDs is composed as of the date of the publication and is subject to changes without prior notice.

    • There are investment risks involved in buying the bonds/CDs. Before investing, investors should consider whether these products are suitable for them in light of their own financial circumstances and investment objectives. Investors should read the offering documents relating to the Bonds/CDs and understand all the terms of the Bonds/CDs and the risks involved before investing in the Bonds/CDs. If investors are in any doubt, seek independent professional advice.

      All indicative prices above are for reference only and do not represent the actual Bonds/CDs prices. Yield to Maturity (YTM) is a hypothetical rate of return if investors were to hold the bonds until maturity, and is solely for reference purpose. It is calculated using the indicative offer price, and is based on several assumptions including a) the issuer will redeem the bond on the relevant maturity date, and b) all coupon and principal payments will be made in full on schedule, and c) coupon payments are reinvested at the “Yield to Maturity”.

      Bonds yield correlates with the credit risks of bond issuers. Credit risk is usually measured by credit ratings assigned by international rating companies such as Moody’s and Standard & Poor’s. Issuers with higher credit risk may pay a higher yield to attract investors. However, credit rating is a lagging indicator of credit risk. If the market perception of the financial strength or credit worthiness of a Bond/CD issuer or guarantor (if any) downgrades, the prices of such Bonds/CDs may fall significantly before the credit rating companies downgrade the issuer/guarantor’s credit ratings.
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    Disclaimer

     

    This information shown in this webpage is based on sources believed to be reliable but Hang Seng Bank Limited makes no representation and accept no responsibility as to its accuracy and shall not be held liable for damages arising out of any person’s reliance upon the information. The information is neither a recommendation, an offer to sell nor a solicitation of an offer to purchase any investment. The prices quoted, coupon rates, indicative yield, maturity dates and other information shown are for reference only and are subject to change without notice.

     

    The offering documents of the bonds are prepared by the issuer of the bond. Hang Seng Bank Limited has not separately verified the information contained in these documents and makes no representation, warranty or undertaking, express or implied, and accepts no responsibility with respect of the accuracy or completeness of any information contained in such documents. If in doubt, please seek independent professional advice.

    "BOND / CERTIFICATE OF DEPOSIT TRADING SERVICES" Factsheet [PDF] Customer Retail Bond and CD List [PDF]