The government should continue with its quarterly Treasury bond issuances because it is positively impacting the local financial market.
Speaking to Bsuiness Times in an exclusive interview yesterday, Robert Mathu, the Capital Markets Authority (CMA) executive director, said the government bond issuance have enabled the bond market to ‘take off’.
“It has set the pace for private sector firms to do similar issuances or sell shares on the capital markets,” Mathu said.
The government has issued five Treasury bonds since February last year, with the latest being issued last week.
“The government should sustain the programme and continue to raise funds for national development through the capital markets,” he urged.
The government started the quarterly Treasury bond issuance programme at the beginning of last year when it issued a Rwf 12.5 billion Treasury bond in February to fund remaining infrastructure projects in the 2013/2014 budget.
Then, through the International Finance Corporation, a Rwf 15.5 billion local currency bond was issued in May last year under the corporation’s Africa debt expansion programme.
In August, the central bank issued a five-year Rwf15 billion Treasury bond and a seven-year Rwf15 billion in November, while in February and May this year, three-year Rwf15 billion and 10-year Rwf 10 billion treasury bonds have been issued under the quarterly issuance programme respectively. Mathu noted that with more issuances, the bond maturity periods were also increasing, with the latest 10-year Treasury bond having the longest maturity in the market.
“The more bonds we have in the market, with longer maturities, the better,” he noted. Longer dated bonds signify a longer yield curve for the pricing of debt in a country.
Regarding the municipal bond issues by local governments, Mathu said they were still refining the legal framework and training district mayors and other officers before they can start coming to the market.
“The market is dynamic and given that we had put in place the legal framework for municipal bonds almost five years ago when we had nothing on the market, we have had to refine the law before the local governments can come to the market,” he explained.