With two listed treasury bonds soon expiring, the government will issue another bond before the end of this month, in a move aimed at encouraging the public to save through the capital market, a top monetary official has said.
The bond that is expected to be listed on the Rwanda Over-The-Counter (OTC) market will generate Rwf2.5 bn for government and will expire in a period of three years, Ambassador Clever Gatete, the Deputy Governor of the Central Bank said.
The government last issued a treasury bond in January this year when it raised Rwf2.5 bn from the three-year bond carrying an interest rate of 9.5 percent.
“The issue of this bond is a sign of government commitment to the support and development of the secondary market,” Gatete told Business Times in a phone interview on Tuesday.
He also explained that this process gives people the opportunity to make long-term savings through investing in securities.
However, the coupon rate at which the bond will trade has not been mentioned with the Gatete saying that it will be announced on the day of issuing it.
In 2008, government issued three treasury bonds that raised Rwf14.3 billion.
Monetary officials said government intends to float Rwf10 billion on the country’s nascent OTC bourse, something they say makes economic sense because interest rates are falling while the economy has shown signs of strong recovery from the 2009 liquidity crunch.
The Capital Markets Advisory Council (CMAC), which regulates capital markets activities in the country, says that the ROTC market is ready for another bond given the good performance of the previously listed debt securities.
“There was oversubscription for the January bond although there was less active trading compared to the past because the bond was subscribed mostly by institutional investors,” said Robert Mathu the Executive Director of CMAC.
In a February interview with François Kanimba, the Governor of BNR, he told Business Times that the government bond market is not performing according to expectation.
The Central Bank boss attributed the poor performance of the treasury bonds which are listed on the ROTC market to the low investor participation that is reflected by irregular trading.
“We are not happy with the performance of the listed treasury bonds and we need to encourage the development of the capital markets,” Kanimba explained.
Officials say that the banks and other financial institutions are participating on the market more than any other player because they understand the market very well.