Archive · 11 Jun 2025
Hong Kong Funds to Sell US Treasuries If Rating Downgraded
Imagine a big group of people in Hong Kong who save money for their retirement in special funds.
These funds are not allowed to invest more than a certain amount of money in US government bonds unless the US has a perfect credit rating.
Because of some rating downgrades, the US might lose its perfect rating.
If that happens, the Hong Kong funds might have to sell some of their US bonds.
This is because their rules say they have to.
They are planning how they would do this.
They would then invest in bonds from other countries that have perfect ratings.
The changes would be made over a few months to give the markets time to adjust.
Hong Kong pension fund managers are planning to sell US Treasuries if the US loses its AAA credit rating.
The Hong Kong Investment Funds Association and Hong Kong Trustees’ Association discussed the plan with regulators.
Local regulations restrict investing more than 10% of funds in US Treasuries without a AAA rating.
FTSE Russell formulated an analysis of the divestment plan at the industry's request.
Managers propose a three-to-six-month period to rebalance investments after a downgrade.
- Who
- Hong Kong pension fund managers.
- What
- Hong Kong pension funds plan to sell US Treasuries if the US loses its top credit rating.
- When
- The plan would be executed within three months if the US is downgraded.
- Where
- Hong Kong.
- Why
- To comply with regulations requiring divestment of US Treasuries if the US credit rating falls below AAA.
Pension Funds
N/A
Compliance with Regulations
Pension Funds
Required to follow mandates, which could necessitate significant market adjustments.
N/A
N/A
- Fund Size
- HK$1.3 trillion
- Regulatory Requirement
- US must have AAA rating for over 10% investment
- FTSE Russell Index
- MPF World Government Bond Index
- Potential Rebalancing Period
- 3-6 months
- Benchmark Return (Annualized)
- 1.03%