[Bond Investment Guide] How to Buy Bonds in Hong Kong?
US Bond Yield 2025｜How to Buy US Debt in Hong Kong in Futures?
1. U.S. Treasury debt
U.S. Treasury Bonds are long-term bonds issued by the United States government to raise funds such as government operating expenses and debt repayments. Commonly issued to large institutional investors and individual investors, USD is one of the most widely circulated and credit-guaranteed bonds globally, widely regarded as an important option for hedge investments and a way to increase passive income.
US Treasury bonds have different maturities, including short, medium and long term bonds. These bonds can be obtained through public tenders, auctions, or direct sales by the U.S. Treasury Department. Repayments of all US Treasury bonds are guaranteed by the US government and are therefore considered one of the safest investments.
What are the benefits of buying US bonds?
1. Security Since US debt is issued by the US government, it is essentially a guarantee of creditworthiness and debt repayment capacity. As a result, US bonds are generally regarded as “non-defaulting” bonds and have the reputation of being one of the safest investment instruments in the world. |
2. Fixed return U.S. Debt provides fixed returns to investors, so investors can earn stable interest income after buying U.S. Debt. |
3. Higher fluidity US Treasury bonds have higher liquidity relative to other types of bonds. |
4. Balancing Risks By purchasing high-risk products at the same time as buying US bonds, US bonds can play the role of balancing risk and return. |
2. Types of U.S. Treasury Bonds
In general, US Treasury bonds can be divided into short, medium and long term. Detailed types of US bonds can be found in the table below:
Types of U.S. Treasury Bonds | Issuance Period | Expiration Date | Dividend frequency | specialties | |
Short-term Treasury | U.S. Treasury Bills (T-Bills) | Within 1 year | 4 weeks; 13 weeks; 26 weeks; 52 weeks Auction once a week | No interest paid before maturity | Direct face discount on purchase and receive the ticket amount on the expiry date. |
Interim Debt | U.S. Treasury Notes (T-Notes) | Within 10 years | Monthly Issue Year 2, 5, 7: End of Month Auction Year 3, 10: Mid-Month Auction | Dividend once every 6 months | · Basically the most important types of bonds ·US 10-year Treasury bonds: a commonly used indicator in the US bond market, and yield rates tend to indicate the market's view of the overall US economy |
Long-term debt | U.S. Treasury Bonds (T-Bonds) | 10-30 years | 10 years; 20 years; 30 years issued monthly; 2, August each year | Dividend once every 6 months | · At maturity, it will be paid to the holder at the bill price along with the interest in the last installment. · At issue, a value close to the current market interest rate is set to be auctioned as the box office rate. |
Treasury Inflation Protected Securities (TIPS) | 10-20 years | 5 years; 10 years; 20 years | Dividend once every 6 months | Capital has the property of adjusting with inflation or contraction | |
3. U.S. Bond Yield
The U.S. Treasury yield, also known as the U.S. bond yield, refers to the rate of return that investors actually get when they hold U.S. Treasury bonds. Yield rates (yield rates) often reflect the market's view of the U.S. economy and finances, and are also influenced by a variety of factors such as inflation, interest rates, face value, holding time, purchase price, and sale price.
Bond Name | Yield (Yield) |
6-MONTH NATIONAL DEBT (US 6M) | 4.28 cm |
1-Year National Debt (US 1Y) | 4.15 cm |
2-Year Treasury Bond (US 2Y) | 4.26 cm |
3-Year Treasury Bond (US 3Y) | 4.28 cm |
5-Year Treasury Bond (US 5Y) | 4.38 cm |
7-Year Treasury Bond (US 7Y) | 4.46 cm |
10-year Treasury note (US 10Y) | 4.57 cm |
20-Year Treasury Bond (US 20Y) | 4.85 cm |
30-Year Treasury Bond (US 30Y) | 4.79 cm |
Data source: Futubull APP, the odds of four and five are calculated and two digits followed by the decimal number. Data Submission Until January 3, 2025 | |
3.1 U.S. 10-year Treasury bond
Here are the US 10-year Treasury bond yields:
3.2 How to calculate the US bond yield (Yield)?
U.S. Bond Yield refers to the profit that investors can make when they hold U.S. Treasury bonds. Yield rates often reflect the market's view of the U.S. economy and finances, and are also influenced by a variety of factors such as inflation, interest rates, and more.
The U.S. Bond Yield (Yield) is broken down by different definitions, including:
Current yield (current yield)
The annual average rate of return, the calculation method is: Current annual bill rate/bond price x 100%
To Notification Redemption Yield (Yield to Call)
The rate of return from the start of holding the bond until the redemption notice is applied only to those bonds that have been redeemed early.
Maturity Yield (Yield to Maturity)
Expecting the return on bond holdings to maturity, usually expressed in the form of an annual rate of return, is also the most commonly used method of calculation.
Example: Buy a bond for $1000 with an interest rate of 5%, which matures in three years.
Investors will receive $50 in debt in the first year, $50 in the second year, and another $50 in maturity in the third year, plus a $1,000 bond value, i.e. the principal amount of the bond, to recover $1150.
At the time of issuing the bond, the issuer has agreed to pay the $1150, and the investor will receive the debt annually and collect the bill's face value when the bond matures.
However, the price of bonds is determined by the market, influenced by factors such as credit rating and interest rates.
MATURITY YIELD (MATURITY YIELD) IS A MEASURE OF THE RATE OF RETURN USED TO BUY BONDS AT DIFFERENT PRICES.
If fruit:
Buy bonds with $950 and have a maturity yield (maturity yield) of 6.9%, higher than 5% when buying bonds worth $1000.
When buying a bond at $1100, the maturity yield (maturity yield) is only 1.6%.
3.3 What is the relationship between the US bond yield (yield) and the price of the bond?
The yield (yield) is borne in tandem with the price of the bond, and generally the following situations occur:
If you buy a bond at bill face value (i.e., “ticket face price” or “fair price”) and hold it until maturity, the yield (yield rate) will be the same as the ticket yield rate.
If a bond is purchased at a price higher than the face value (i.e., the “premium”), the yield (yield) will be lower than the bill rate.
If you buy a bond at a price below the bill value (i.e. the “discount price” or the “spot price”), the yield (yield rate) will be higher than the bill rate.
3.4 Relationship between US Bond Yield (Yield) and Stock Market
The relationship between the US bond yield (US bond yield) and the stock market can be somewhat mixed, sometimes positively related and sometimes negatively related.
As an example of recent US equity movements, the Nasdaq index has shown a marked negative correlation with the 10-year US Treasury yield (yield) since August, with the yield (yield) spiking, but the Nasdaq holding a low level. The reason for this is largely due to the above-expected climb in US bond yields (yields). In the future (2024), it is also important to pay attention to changes in the US bond yield (yield).
3.5 Will the US increase in interest rates affect the US bond yield (yield rate)?
The rise in US bond yields (yield) is influenced by various factors, one of which is the increase in interest rates in the United States.
Based on the history of US rate increases, the US Federal Reserve raised interest rates 11 times in a row from March 2022 to 27 July 2023. A rise in US interest rates will be accompanied by a rise in the US bond yield (yield), causing debt prices to fall. As recently as November 2, 2023, the Federal Reserve announced the end of interest rate hikes, somewhat pausing the rise in the US bond yield (yield).
4. How to buy US Treasury bonds in Hong Kong?
In Hong Kong, you can buy US bonds with Futu. Please note the following points:
Holders of a Hong Kong Securities Account (such as a Futu Securities Account) may trade US bonds in Hong Kong.
US Treasury bonds are denominated in US dollars and must be converted into US dollars before purchase.
There are several types of US Treasury bonds, and you need to choose the right bonds according to your personal risk preference.
Need to be familiar with the risks and opportunities of the US Treasury market and do a thorough research before buying.
Buy US bonds, use Futubull. Buying US bonds requires understanding the related fees and terms, and researching and understanding the products. If you have any questions, please contact a professional.
4.1 How to Buy US Bonds on Futu
Futu is a global provider of financial investment services, offering clients a wide range of products including Hong Kong stocks, US equities, US bonds, equities and futures. Futu offers a variety of U.S. debt products at different ratios, continues to invest money in new bonds after the maturity of the existing U.S. debt, maintaining stable interest income and increasing long-term financial security
Bond fees are comprised of trust fees and transaction fees, click here to find out the FutuBond Fees Standards。
Here are the steps to buy US bonds in the Future:
You need a platform that can trade US bonds, go toFutu Internet, and register a new account. (Register now)
Fund Deposit Fill in your personal and financial details, then deposit via bank transfer, debit card, or Apple/Google Pay.(Instant Deposit)
Download the Futubull App and log in.(Download now)
Click [Buy] on the bond details page after searching for the bonds you want to trade on the Bonds Home page or by searching for the bonds you want to trade.
Enter the face value you want to buy and the expected purchase price, and you can place an order based on the Reference Selling Price. (This price is a “reference price” only, and the actual executable transaction price may have an exit with it.)
Click [Buy] - Enter the transaction password, please wait patiently after the order is submitted successfully, and the transaction price will not exceed the order price
*Please note that all relevant fees and conditions are known to you prior to the transaction. Futu Securities may incur partial transaction fees depending on account type and transaction volume.
4.2 Buying U.S. Debt Learning “Bond Ladder” Investment Strategies
Investors who want to earn a steady income for buying US bonds typically use the Bond Ladder to generate a stable cash flow. In other words, the average maturity of the invested US bonds is spread over the short, medium and long years, and then the investment is made each time the bond matures.
examples
With $1 million in capital, Xiao Ming wanted a fixed income as a living expense to avoid interest rate volatility and low liquidity, so he adopted a “bond ladder strategy”, investing his money on average in 4 US Treasury bonds with different maturities.
1. Divide this $1 million into 4 pieces of $0.25 million each
2. Invest in 6-month, 12-month, 18-month and 24-month maturing US bonds, respectively
When the US Debt matures:
When USD 0.25 million is withdrawn after maturity of USD 0.25 million USD due in June, the money is invested in USD 12 months maturity; when USD 0.25 million is withdrawn at maturity of USD 12 months, the money is invested in USD 18 months maturity.
This creates a stable cash flow and, after releasing funds every 6 months, allocates the risk of the dividend rate, making the portfolio more stable.
The principal and interest on the bond are repaid by the issuer or guarantor (if any) and the bondholder bears the credit risk of the issuer or guarantor. If the issuer or guarantor fails to fulfill the contract, the bondholder may not be able to recover principal and interest on the invested bond. U.S. GOVERNMENT BONDS ARE ISSUED AND GUARANTEED BY THE U.S. GOVERNMENT AND ARE TRADED OFF-SITE. Investing involves risk, the price of which is influenced by market supply and demand relationships. While there is a higher chance of recouping principal and interest on invested US government bonds, bondholders who redeem bonds early may incur losses due to market risks. The US government is less likely to default on debt principal and interest, but changes in its financial condition and credit rating also have the potential to lead to default. Therefore, before making any investment decision, clients should carefully read the relevant sales documents, fully understand their risks and the characteristics and consequences of the relevant laws, taxes and accounting, and decide, depending on the individual's circumstances, whether the investment meets the individual's financial situation and investment objectives and whether they can bear the risks involved. Appropriate professional advice should be sought at times.
