New investment opportunity as govt announces Rwf10bn 5-year TB issuance

Rwandans have yet another opportunity to invest, save and support the national development effort after National Bank of Rwanda (BNR) announced bids for five-year Rwf10 billion Treasury bond.

Rwandans have yet another opportunity to invest, save and support the national development effort after National Bank of Rwanda (BNR) announced bids for five-year Rwf10 billion Treasury bond.

Pierre Celestin Rwabukumba, the RSE chief executive officer, said investing in Treasury bonds ensures regular income, adding that they are risk-free.

“Treasury bonds are a good asset class like any other income-generating instruments, which ensure investors regular income (every six months), as well as a tax incentive of 5 per cent withholding on interest income as opposed to 15 per cent ordinarily.

“They are also a risk free investment as government does not default or delay to pay the interest, and predictability of income during the whole lifetime of the bond,” he added.

According to bid notice from the central bank, money raised from the TB issuance will, like the previous ones, be used to fund infrastructure projects and support the local capital market development.

The statement published on Monday August 14 indicates added that bids will open Monday August 21 and on Wednesday August 23 (4.30pm). Investors need to open central securities depository accounts with licensed commercial banks or capital market brokers to participate, the statement added. The bond issuance, scheduled for August 23, and it will be listed on the Rwanda Stock Exchange on August 29.

Its coupon rate will be determined at the close of book-building on August 23, while its redemption date is 19/08/2022, BNR indicates.

Government has been issuing regular bonds since 2014 under its quarterly TB issuance programme.

May bond issue

The seven-year Rwf10 billion Treasury bond issued in May received a 103.03 per cent subscription rate. However, the participation of retailers and individual investors dropped to 5.86 per cent of which foreign investors were allocated 2.41 per cent. This was a decline from the record high of 19.5 per cent registered during the February bond issuance.

Participation of banks was 10 per cent, from 35.91 per cent, while non-financial institutional investors dominated, scooping 84.14 per cent of the total amount offered compared to 44.58 per cent in February.

However, Rwabukumba said this was seasonal “as some people had just bought into the I&M IPO, among other issues.

“There has, however, been an increase in participation among retail investors on secondary market. This has pushed turnover and number of transactions by over 500 per cent,” he added.

He said RSE and stakeholders have an ongoing campaign to educate the public about benefits of investing in these instruments through road shows, social and other media outlets and one-on-one approach.

“However, this takes time as someone is trying to decide how to allocate their scarce resources, so it takes time and a lot of efforts to convince them,” he said.

Bond market performance

Rwabukumba said the performance of the bond market has been “quite progressive”.

He said bond market recorded Rwf3.4 billion turnover in the first half of the year, up from Rwf514 million, indicating a 561 per cent growth compared to the same period last year. They registered 90 deals or 200 per cent rise compared to 30 deals in 2015.

According to the RSE annual report for 2016, the bond market registered a turnover of Rwf1.7 billion from 1.63 billion worth of bonds in 99 deals. This was an increase of 86.2 per cent and 230 per cent in terms of turnover and transactions, respectively, compared to the same period of 2015.

During the year, government issued four Treasury bonds with a face value of Rwf55 billion under quarterly issuance programme, dominating the fixed income market, the report indicates.

 

 

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