Bonds and Certificates of Deposit

Investment involves risks.

Product overview

A wide variety of bonds and certificates of deposit 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. Tenors ranging from 1 to 10 years for bond investment and from 3 months to 3 years for CD investment are available.

Purchase in just 3 quick steps

Before beginning your investment journey

Product risk level

Product risk level
1
2
3
4
5

Risk Profiling Questionnaire

Substitute Form W-8BEN [1]

Complete the form on Invest Express Mobile App for eligible bonds issued by US corporations.

Professional Investor (PI)

Product types

Product categories

BONDTYPE
CD_BOND

Certificate of Deposits

Coupon rate
Product risk level

Coupon rate
Product risk level

Coupon rate
Product risk level

Key product features

  • 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

About bond's 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.

Credit rating for Investment Grade:

Moody's Standard & Poor's What do the Ratings mean?
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

Credit rating for non-Investment Grade:

Moody's Standard & Poor's What do the Ratings mean?
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.

Things to note for credit ratings opinions 

  • Credit rating opinions are not intended to be a prognosis or recommendation
  • not necessarily an indication of liquidity or volatility
  • may be downgraded if the credit quality of the relevant entity or asset or obligation declines, and
  • 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.

Illustrations and information

What are Bonds and CDs?

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 pay interest regularly 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 quasi-government bodies, supranational organisations and corporations. A wide selection of bonds with different investment tenors, ranging from 1 to 10 years with various benchmark yields is also available to suit different investors’ needs. 

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 with interest at maturity.
Hang Seng Bank offers investors with different types of CDs with various tenors and currency denominations to suit different investment objectives.

Via website

Step 1
Log on to Personal e-Banking and select “Investments” > "Bonds and CDs" > "Explore Bonds and CDs" via left menu.

Via mobile app

Step 1
Log on to Hang Seng Personal Banking mobile app and select “Investments” > "Bonds and CDs" via left menu.

Example

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.

Suppose you are subscribing an Bond with following terms:

Terms

Units

Invested Amount

USD98,000.00

Fixed Rate 

98%

Coupon Rate 

3% p.a.

Face value 

USD 100,000.00

Maturity Date

December 15, 2018

Interest payment of 3% every year

Miss. Chin will receive an interest payment of USD3,000 (USD100,000 x 3%) every year before the maturity. On December 15, 2018, Miss. Chin will receive the final coupon payment of USD3,000 plus USD100,000 principal amount.

  1. 2013

    US$3,000 (US$100,000x3%)

  2. 2014

    US$3,000 (US$100,000x3%)

  3. 2015

    US$3,000 (US$100,000x3%)

  4. 2016

    US$3,000 (US$100,000x3%)

  5. 2017

    US$3,000 (US$100,000x3%)

  6. 2018

    US$3,000 (US$100,000x3%)

+US$100,000(principal)
  • Principal: USD100,000
  • Total coupon payment: USD3,000 x 6 years = USD18,000
  • Initial investment: USD98,000
  • Profit: USD100,000 + USD18,000 – USD98,000 = USD20,000

Sells the bond with market price

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 USD1,500 plus USD102,000 (102/100 x USD100,000) for the sale of the bond.

  1. 2012

    Invest USD98,000

  2. 2013

    Receive USD103,500 after redemption

  • Market value when selling the bond: USD102,000
  • Total coupon payment: USD3,000 x 0.5 year = USD1,500
  • Initial investment: USD98,000
  • Profit: USD102,000 + USD1,500 – USD98,000 = USD5,500

May not receive the face value of the bond at maturity

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.

  1. 2012

    Invest USD98,000

  2. 2013

    US$3,000 (US$100,000x3%)

  3. 2014

    US$3,000 (US$100,000x3%)

  4. 2015

    Issuer defaults

  • Face value: USD0 (Assume no recovery value) Investors will not be able to collect the coupon or principal as scheduled
  • Total coupon payment: USD3,000 x 2 years = USD6,000
  • Initial investment: USD98,000
  • Loss: USD98,000 – USD6,000 = USD92,000

Offering documents

Bonds and Certificates of Deposit related documents

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 organisations (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

Knowledge and insights

Winning through stability –
Bond investment and volatile markets

Bond & FX Flows (Cantonese version)

Latest market focus – Bonds (Cantonese Version)

Bonds market sector focus

Bonds market outlook

Financial breakfast (Cantonese version)

Investment overview in global market (Cantonese version)

Open a securities account

New to Hang Seng Bank

Open a bank account and investment
account with Hang Seng Personal Banking Mobile App[7]

Existing integrated account holders

Comprehensive Bonds/CDs Investments
experience is just a few steps away[8]

Non-integrated account holders

Open an Integrated Account at designated branches and activate your investment account via Personal e-Banking

You may be interested in

Need more help?

Call us

General hotline

(852) 2822 0228

Visit our branches

Footnote

Other point(s) to note

  1. For label meaning on bonds / CDs, please refer to below list.
    PI - Professional Investors

    WMC - Cross-boundary Wealth Management Connect[6]

    ESG - Environmental, Social and Governance[4]

    Comm - Communication Services

    Condis - Consumer Discretionary

    Constp - Consumer Staples

    Div - Diversified

    En - Energy

    Fin - Financials

    Go - Government

    Health - Health care

    Ind - Industrials

    Mat - Materials

    RE - Real Estate

    Tech - Technology

    Util - Utilities

Remark(s)

  1. For Joint accounts, all non-US account holders need to maintain a valid US IRS W-8BEN Form with the Bank and the W-8BEN Form will be subject to regular review. Customer can visit the US IRS website to download the US IRS W-8BEN Form and for instructions on completing the Form. If you would like to know more about the W-8BEN Form, please consult your professional adviser including but not limited to tax adviser. We cannot provide you with any legal and/or tax advice.
  2. Types of bonds for investment include government bonds, local quasi-government bonds, supranational bonds and corporate bonds. Certificates of Deposit (CDs) issued by financial institutions such as banks are also available.
  3. Businesses and projects that promote the transition to low-carbon, climate resilient and sustainable economy and provide clear environmental sustainability benefits, providing another investment angle instead of traditional financial gauges.
  4. There are no standardized definitions of ESG products that are established in the market. (The Bank) relies on external third party’s information when assessing ESG classification for products and the source of information is based on sources that the Bank believe is reliable. The Bank may not be able to provide the update of ESG classification in a timely manner. The ESG indicator is for general information and reference only, and is not nor is it intended to be a solicitation, recommendation or advice on any bonds / CDs. Investors should note that all investments involve risks (including the possibility of loss of the capital invested), prices of bond / CD may go up as well as down and past performance information presented is not indicative of future performance. Investors should read carefully and understand the relevant bond's / CD's offering documents (including the bond / CD details and full text of the risk factors stated therein) before making any investment decision.
  5. Tenors ranging from 1 to 10 years for bond investments are available. Characteristics of these eligible bonds include: low-to-medium risk level, non-complex bond and investment grade.
  6. We allow eligible investors to purchase bonds / CDs which are available in major currencies (including Renminbi) and tenors ranging from 1 to 10 years.
    Characteristics of these eligible bonds / CDs include:
    • Low-to-medium risk level
    • Non-complex structure
    • Government and Corporate Bonds

    For details, please view our [eligible retail bond listfor Southbound Service or call our Cross-boundary WMC hotlines at (852) 2912 3456 (Hong Kong) or (86) 4001 20 3456 (Mainland).

    Hotlines details:

    Applicable to Hong Kong and Mainland:

    Office hour of Cross-boundary WMC Hotline is Monday to Friday, 9 a.m. to 6 p.m., except weekend and Hong Kong Public Holiday.

    Applicable to Mainland:

    The toll-free enquiry hotline allows you to contact us for free even while staying on the Mainland. The toll-free hotline can be accessed from mobile lines, fixed telephone lines, payphones and call cards and is free of IDD charges.
    Please contact the relevant service supplier for details. Customer agrees to be bound by the terms and conditions for the service provided by service providers, which may be amended from time to time. For any claims, disputes and complaints regarding such service and information, customer should refer directly to service providers. Hang Seng Bank Limited (Hang Seng Hong Kong) assumes no responsibilities for such service.

  7. You can open a bank account online with your mobile phone only if you do not hold any of the following Hang Seng Bank accounts, including but not limited to:
    • Savings / Current Account (including passbook and statement savings account)
    • Integrated Account
    • Credit Card Account
    • Business Account
    • Joint-named Account
    • Mortgage Plan
    • Safe Deposit Box Services
    The service is also only available if you fulfil all of the below criteria:
    • Aged over 18 and under 65
    • A permanent Hong Kong resident
    • Not a US citizen or tax resident
    • Residing in Hong Kong (with current residential and correspondence address(es) in Hong Kong)
    • Currently located in Hong Kong
  8. Integrated account is referring to the following accounts:
    • Prestige Banking
    • Preferred Banking
    • Green Banking
    • Integrated Account
    • M.I. Kid Asset Builder Account