I submitted a subscription for the Hong Kong government's iBonds. Given that I expect allocations to be scaled back substantially, I used most of my available HKD cash - equivalent to about two years worth of living expenses.
It has been reported that total subscriptions were about HKD13 billion (total issue size is HKD10 billion with no provision for over allotment). Given that the government has stated that it wants every subscriber to get at least one board lot (HKD10,000) and reports from banks handling applications suggest that a lot of the subscriptions were for relatively small amounts, I still expect to get scaled back significantly.
Given my reservations about the merits of the iBonds as an investment when viewed in isolation or in comparison to equities, it's worth reminding myself that the iBonds will form part of the (approximately) two years worth of living expenses which I want to hold in cash or near cash form once I retire. As such, although I expect them to generate a loss in real terms (fee waivers by the banks notwithstanding), they are still a much better deal than bank deposits or other available HKD denominated bonds of similar maturity. Put differently, the purpose of this investment is to reduce risk rather than to generate optimal returns.
The downside to owning iBonds is really just the opportunity cost. I have considered the argument put forward by some commentators that the iBonds could end up trading below par in the event that we experience a combination of low inflation (or deflation) and rising interest rates. Even if that were to happen (i) it would have to apply, on average, over the three year term and (ii) there is a floor of 1% which means that the bonds will show a positive real return if inflation is less than 1% and (iii) the relatively short term would allow me to hold to maturity without too much pain.