Hong Kong Interbank Offered Rate (HIBOR)

The Hong Kong Interbank Offered Rate (HIBOR) is a family of Hong Kong dollar interest-rate benchmarks representing estimated rates at which deposits for specified periods are offered to prime banks in the Hong Kong interbank market. HKD HIBOR is owned by the Hong Kong Association of Banks (HKAB), administered by the Treasury Markets Association (TMA), calculated by Hong Kong Interbank Clearing Limited (HKICL), and published for eight tenors from overnight to 12 months.

HIBOR is an input to some loans, mortgages, floating-rate securities, and derivatives; it is not a universal Hong Kong borrowing rate. A contract must identify the tenor, fixing date, reset frequency, spread, day count, floor, and fallback. Hong Kong has also developed the transaction-based overnight benchmark HONIA, but official Hong Kong guidance has stated that there is no announced plan to discontinue HIBOR.

Key Takeaways

• HKD HIBOR has eight settings: overnight, one week, two weeks, one month, two months, three months, six months, and 12 months.
• Contributing banks submit estimated HKD deposit offer rates for prime banks at 11:00 a.m. Hong Kong time.
• The calculation excludes the three highest and three lowest submissions and averages the remaining quotes.
• HKAB’s specification states that HIBOR is published on Hong Kong business days at 11:15 a.m., subject to its correction policy.
• A HIBOR-linked payment usually combines the selected HIBOR fixing with a contractual margin.
• HIBOR is a forward-looking term, bank-credit-sensitive benchmark; HONIA is an overnight transaction-based alternative.
• Continued publication does not eliminate fallback risk. Contracts still need provisions for temporary unavailability, material change, or future cessation.

How HIBOR Is Organized

The organizations involved have different responsibilities:

The official specification provides for a panel of 12 to 20 contributing banks. The result is quoted to five decimal places. Because it is a panel-based benchmark, HIBOR is an estimate of standardized prime-bank funding conditions, not a record of one deposit transaction or an average of every trade completed that day.

How HIBOR Is Calculated

For each tenor, contributing banks submit the rate at which they estimate HKD deposits for that contract period are being offered to prime banks at 11:00 a.m. HKICL then:

1. gathers eligible submissions before the contribution cutoff
2. removes the three highest and three lowest quotes
3. averages the remaining middle quotes
4. rounds and publishes the fixing under the benchmark specification

This trimming reduces the effect of extreme submissions, but it does not make HIBOR a risk-free or purely transaction-based rate. The submissions can reflect term liquidity and bank credit conditions as well as expected monetary-policy and currency-market conditions.

How a HIBOR-Linked Rate Resets

A common cash-product structure is:

The benchmark and margin are separate. A borrower may negotiate the margin once, yet still face changing interest expense whenever HIBOR resets. The exact payment also depends on the principal, day-count convention, interest-period dates, and any floor or cap.

Worked Example

Assume an HKD 20 million facility resets monthly at one-month HIBOR plus 1.75%. If the relevant fixing is 3.20%, the annualized all-in rate is:

Using an illustrative 30/365 day-count fraction, the interest for that period is approximately:

If the next comparable HIBOR fixing rises by 40 basis points to 3.60%, the all-in rate becomes 5.35%. On the same assumptions, period interest rises to about HKD 87,945, an increase of approximately HKD 6,575.

This is a simplified benchmark-reset example. The contract can use a different observation date, number of days, calendar, rounding method, margin, cap, or floor.

Where HIBOR Appears

HIBOR can be referenced by:

• HKD floating-rate corporate and syndicated loans
• some Hong Kong mortgage pricing arrangements
• floating-rate notes and certificates of deposit
• interest rate swaps and basis swaps
• valuation, transfer-pricing, and hedge-accounting processes where the governing instrument specifies HIBOR

Not every HKD loan uses HIBOR. Prime-based, fixed-rate, HONIA-linked, and institution-specific pricing can produce different reset behavior.

HIBOR Versus HONIA

The Hong Kong Dollar Overnight Index Average (HONIA) is an overnight benchmark based on eligible unsecured HKD interbank lending transactions. A HIBOR tenor is available near the start of an interest period, while a compounded HONIA period rate is generally known only as daily overnight observations accumulate.

Hong Kong authorities have identified HONIA as an alternative reference rate while stating that HIBOR is not scheduled for discontinuation. That is coexistence, not equivalence. Moving a contract from HIBOR to HONIA can change timing, basis, credit-spread exposure, and valuation.

Why HIBOR Moves

HIBOR can respond to:

• Hong Kong dollar liquidity in the banking system
• expectations for policy and money-market rates
• demand for term bank funding
• bank credit and liquidity premiums
• quarter-end, year-end, or balance-sheet effects
• HKD funding pressure related to currency-market flows
• tenor-specific supply and demand

HIBOR should not be interpreted as a forecast that all Hong Kong interest rates will move by the same amount. Different tenors and other benchmarks can respond differently to the same market event.

Risks and Common Mistakes

• Reset risk: The all-in rate can rise even when the loan margin is unchanged.
• Basis risk: A hedge may reference a different HIBOR tenor, reset date, or benchmark from the exposure.
• Panel risk: HIBOR is based on submissions, not solely on completed transactions.
• Tenor risk: Overnight, one-month, and three-month HIBOR are separate settings, not interchangeable labels.
• Fallback risk: Continued current publication does not guarantee permanent availability.
• Floor risk: A benchmark floor can prevent the borrower from receiving the full benefit of a lower fixing.
• Operational risk: Using the wrong publication day, holiday calendar, or revised fixing can misstate cash flows.
• Data-use risk: Official rates are subject to HKAB terms for access, use, and redistribution.

Common errors include calling HIBOR Hong Kong’s policy rate, treating HONIA as the same economic rate, using a current website fixing for a historical reset date, and comparing loan margins without comparing the benchmark and floor.

How to Evaluate a HIBOR-Linked Contract

1. Identify the exact HIBOR tenor and currency stated in the instrument.
2. Confirm the fixing date, official source, publication time, and business-day convention.
3. Add the contractual margin and apply any floor, cap, or rounding rule.
4. Recalculate the payment with the correct principal, day count, period dates, and payment timing.
5. Review temporary-unavailability, material-change, and permanent-cessation provisions.
6. Compare each hedge’s benchmark, tenor, reset dates, notional, and maturity with the underlying exposure.
7. If HONIA is proposed, evaluate compounding, observation timing, spread adjustment, and value transfer.

Official Sources

• Hong Kong Association of Banks: HKD HIBOR rates is the official rate publication page and links to the current specification.
• HKAB: HKD Interest Settlement Rates specification identifies the owner, administrator, calculation agent, tenors, panel, calculation, and publication time.
• Hong Kong Monetary Authority: Benchmark reform information for corporate treasurers explains the relationship between HIBOR and HONIA.
• HKMA market-data documentation describes HIBOR and HONIA data series and the transaction basis for HONIA.

Related Terms

• Benchmark Rate: A standardized input used to price and settle financial contracts.
• Interbank Rate: The broader bank-funding-market concept behind HIBOR.
• Overnight Rate: The maturity category measured by HONIA and overnight HIBOR under different methodologies.
• Interest Rate Swap: A derivative that can exchange fixed and HIBOR-linked cash flows.
• Basis Point: The standard unit for measuring changes in HIBOR and loan margins.
• LIBOR: A separate benchmark family whose cessation does not mean HIBOR also ceased.

FAQs

This article provides general financial education, not personalized investment, mortgage, borrowing, accounting, tax, or legal advice. Use the governing contract and current HKAB and TMA materials for a specific HIBOR-linked obligation.