Understanding Hong Kong’s Exchange Fund Bills & Notes — Liquidity Flow Analysis

What Are Exchange Fund Bills & Notes (EFBNs)?

Exchange Fund Bills and Notes are debt securities issued by the Hong Kong Monetary Authority (HKMA) to manage liquidity in Hong Kong’s banking system. It is a key tool for controlling how much cash is available in the banking system.

Exchange Fund Bills (EFBs):

• Short-term securities (91 days, 182 days, or 364 days)
• Sold at a discount to face value (the difference is the yield)
• No interest payments

Exchange Fund Notes (EFNs):

• Longer-term securities (2, 5, 10, or 15 years)
• Pay semi-annual interest (coupon payments)
• Return principal at maturity

Why Do EFBNs Matter?

Every EFBN transaction affects the Aggregate Balance – the total amount of money in Hong Kong banks’ clearing accounts with the HKMA. This is essentially the banking system’s interest paying “liquidity pool.”

The Net Injection or Absorption amount shown below should have some predictive power of the amount of the “Interest Payment/Issuance of Exchange Fund Bills and Notes” shown in the HKMA’s Daily Monetary Statistics on the same day.

The Cash Flow Mechanics:

When EFBNs are issued:

• Banks buy securities from HKMA
• Money flows OUT of the Aggregate Balance
• Result: Less liquidity in the banking system

When EFBNs mature or pay coupons:

• HKMA pays banks back (principal + interest)
• Money flows INTO the Aggregate Balance
• Result: More liquidity in the banking system

Understanding the Net Flow:

Net Flow = Maturities - Issuances

Example:
- If $3,000M matures and $2,500M is issued
- Net Flow = +$500M (liquidity injection)
- Aggregate Balance increases by $500M

About This Data

This table is updated regularly using official HKMA data sources:

• Daily tender results announcements
• Tentative issuance schedules
• Historical liquidity statistics

The data helps track Hong Kong’s monetary operations and their real-time impact on banking system liquidity.