What is Hong Kong Interbank Offered Rate ?

2381 reads · Last updated: December 5, 2024

The Hong Kong Interbank Offered Rate (HIBOR) is the rate at which banks in Hong Kong lend to each other in the interbank market. HIBOR is published daily by the Hong Kong Association of Banks and reflects the supply and demand for short-term funds among banks. HIBOR is an important benchmark rate in the Hong Kong financial market, widely used for loan, deposit, and derivative pricing.

Definition

The Hong Kong Interbank Offered Rate (HIBOR) is the interest rate used for lending between banks in the Hong Kong interbank market. HIBOR is published daily by the Hong Kong Association of Banks and reflects the supply and demand for short-term funds between banks. It is an important reference rate in the Hong Kong financial market, widely used for pricing loans, deposits, and derivatives.

Origin

The origin of HIBOR dates back to the 1980s when the Hong Kong financial market needed a standardized rate to reflect the cost of interbank borrowing. In 1983, the Hong Kong Association of Banks began officially publishing HIBOR to provide a transparent and reliable benchmark rate.

Categories and Features

HIBOR is categorized based on different borrowing terms, including overnight, one week, one month, three months, six months, and one year. Each term's HIBOR reflects the supply and demand for funds over that specific period. Short-term HIBOR is typically more susceptible to market liquidity and economic events, while long-term HIBOR reflects market expectations for future interest rate trends.

Case Studies

Case Study 1: During the 2008 financial crisis, HIBOR rose significantly, reflecting market concerns about interbank lending risks. This change led to higher loan rates in Hong Kong, affecting borrowing costs for businesses and individuals. Case Study 2: In 2019, social unrest in Hong Kong led to increased HIBOR volatility, raising interbank borrowing costs and further impacting market liquidity and stability.

Common Issues

Common issues investors face when using HIBOR include misunderstandings about rate volatility and underestimating its impact range. HIBOR fluctuations can affect loan and deposit rates, so investors need to closely monitor market dynamics. Additionally, confusion often arises between HIBOR and other rates like LIBOR; investors should understand the applicable scope and impact of different rates.

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