MPF Bond Funds Suffer as Global Yields Rise; Money Market Funds Outperform Hong Kong Stocks
HK01 · 1 SOURCES1 day ago2 MIN
Summary
Hong Kong's Mandatory Provident Fund members holding bond-heavy allocations are experiencing mounting losses as global sovereign bond markets continue their historic selloff. The 10-year US Treasury yield has surged past 5.2 percent, devastating bond fund performance across the board. Meanwhile, money market funds have delivered remarkably stable returns, with RMB and HKD money market funds achieving 3.75 percent year-to-date, surpassing the 3.63 percent gain recorded by Hong Kong and China equity funds. Investment experts suggest that under the current interest rate environment, bond funds have failed to provide their intended defensive characteristics.
Key Points
- US 10-year Treasury yield has climbed from approximately 1.6 percent in 2022 to over 5.2 percent currently, triggering widespread bond market selloffs
- Asian bond funds lost 0.90 percent year-to-date, global bond funds fell 1.60 percent, and HKD bond funds declined 1.93 percent through September 2026
- RMB bond funds remain the sole positive performer among bond categories, delivering 5.74 percent year-to-date returns due to China's low interest rate policy
- Raymond Lei Zhi-hai, Chief Investment Officer at Ambreed Globe Financial, notes most MPF bond funds have performed poorly over the past four to five years
- Manulife MPF International Bond Fund holds approximately 22-year maturity 3 percent US government bonds and 7-year maturity 4.375 percent US government bonds
- MPF conservative funds and money market funds provided better downside protection than traditional bond funds during the rate hiking cycle
- Lei recommends near-retirees consider money market funds over bond funds for enhanced capital preservation in the current environment
- Lei advises young workers to maintain full-attack or equity-focused allocations, avoiding defensive shifts based on short-term market volatility
Why It Matters
With Hong Kong workers holding approximately HK$1.18 trillion in MPF assets, the underperformance of bond-heavy portfolios could significantly impact retirement outcomes for members approaching pension age. The divergence between money market and bond fund performance challenges conventional MPF asset allocation wisdom, suggesting that traditional defensive positioning may require fundamental reconsideration in persistent high-yield environments .
With Hong Kong workers holding approximately HK$1.18 trillion in MPF assets, the underperformance of bond-heavy portfolios could significantly impact retirement outcomes for members approaching pension age. The divergence between money market and bond fund performance challenges conventional MPF asset allocation wisdom, suggesting that traditional defensive positioning may require fundamental reconsideration in persistent high-yield environments .