Bonds and liquidity
A 2.29% coupon, but a 1.76% indicative yield. Where is the difference?
This week’s RMB government bond reopening illustrates why the coupon alone cannot describe a buyer’s return. Purchase price, repayment and timing also count.
The dates matter before the arithmetic
The HKMA announced on 6 November a reopening of an originally ten-year RMB government bond for tender on 12 November and settlement on 16 November. It matures on 15 May 2035, with approximately 8.50 years remaining. The annual coupon is 2.29%, paid semi-annually. The 6 November indicative price was 104.18 and the semi-annualised yield 1.760%.[1]
These are dated reference figures. As of 9 November, the tender has not occurred. They are not its eventual execution price or result, and the original ten-year designation is not the remaining holding period.
The coupon is calculated on face value
In a simplified illustration, buying RMB50,000 face value at a clean price of 104.18 costs RMB52,090 before accrued interest, fees or taxes. A 2.29% coupon pays RMB1,145 annually, or RMB572.50 each half-year. This is arithmetic using the reference price, not a tender outcome.
Dividing RMB1,145 by RMB52,090 gives approximately 2.198%. That simple annual coupon-to-clean-cost ratio omits payment timing and the RMB2,090 difference between purchase cost and RMB50,000 principal repayment. It is not the quoted yield to maturity.
A premium reduces yield to maturity
The coupon is based on face value and does not increase with the buyer’s price. Assuming contractual payment in full at maturity, a purchase above par therefore returns less principal than the clean-price outlay. Yield to maturity discounts coupon and principal cash flows to the purchase price, accounting for their timing.[2]
The published 1.760% uses a specific quotation convention. Actual holding-period returns also depend on execution price, costs, taxes, coupon reinvestment and any early sale. A family measuring wealth in another currency must assess RMB exchange-rate changes separately.
Match the asset to the payment date
G70 analysis suggests that money required in two years should not be treated as covered simply because a bond maturing in about eight and a half years pays a coupon. An early sale can realise less than the purchase price. The relevant figure is cash available when required.
This is an institutional reopening, with applications through the relevant Primary Dealers.[1] Any actual comparison should establish clean price, accrued interest, total settlement amount, bid-offer spread and exit arrangements. The example explains return mechanics and is not a recommendation of this bond.
Official and primary sources
- HKMA — RMB government bond reopening, 6 November 2026
- Reserve Bank of Australia — Bonds and the Yield Curve
Sources checked on 9 November 2026.
