Raising money for education is a challenge everywhere and Hong Kong's system compares favourably with, say, British private schools, where prices are stratospheric, or American ones, where parents' "contributions" often can carry the same benefits as debentures, but have no market-signalling value.
Differences in yield have also appeared between the debentures issued by IBJ and by the other two long-term credit banks.
At the latest auction NCB debentures offered a coupon 40 basis points higher than those issued by IBJ.But risk generally remains ill-rewarded, and not just because of regulation.
They were given a monopoly on issuing five-year bank debentures.
In 1931 a New York Times advertisement stored in the castle at Vadstena summoned investors to take part in an IMCO issue of $50m 5% convertible gold debentures.
AMONG the most commercial of cities, Hong Kong follows many markets; but none more intently than the trade in debentures tied to admissions to the city's international primary and secondary schools.
So companies scoop up debentures for their staff some expatriates are refusing jobs in Hong Kong because they cannot find schools for their children.
That implies a capital loss to buyers of NCB debentures of about 20%.One way of showing how inefficient Japanese bond markets are compared with their counterparts in other parts of the world is to convert fixed-rate yields to a floating rate, usually LIBOR.
Although the fixed rate of return was reduced last year to 2 3/4%, it is still higher than what has been available until recently from, say, government bonds or bank debentures.
Alternatively, two years ago Hong Kong International School bought back all its debentures and then reissued them at a higher price much as a company might when business is good.Even so, the debenture systems are opaque the ratio between debenture-holders and accepted students is unknown.
IBJ's bond traded at lower yields than government debt simply because debentures and corporate bonds are not listed on any exchange, so the investors that bought them did not have to report losses come year-end.Treating credits of different quality in the same way was not as mad as it sounds, for the differences were more apparent than real.
