{{Rwanda issued a Rwf 12.5 billion (US$18.3 million) treasury bond with a three-year maturity period. This move is in line with the renewed government commitment to revive the bond market.}}
Proceeds from the bond will be used to finance infrastructure projects as well to develop the capital market.
While announcing the bond, the Minister of Finance and Economic Planning, Claver Gatete, said that currently the capital market in Rwanda is still at initial stages characterised by dominance of banks with over 80% holdings. The bond will therefore help stimulate the sector.
“The Government of Rwanda plans to embark on a Treasury bond program in a bid to boost the capital market development and fund infrastructure projects,” said Minister Gatete, adding that the primary objective is to increase and diversify participants in the Treasury Bond Market.
The bond target market is domestic, regional and international investors, gradually in that order.
On the local stage the bond targets banks, investment groups, Umurenge SACCOs, Micro-Finance Institutions, Cooperative Banks, Insurance companies, Pension Funds among others.
Minister Gatete added that “domestic preliminary market surveys indicated a huge appetite from local investors while regional investors have expressed interest to participate in the local market following the success of the Rwanda Sovereign Bond and the need for diversification”.
The main driver for regional investment is the spread between the local interest rate and the ones for the issuer country, the stability of the local currency and the level of inflation, and the status of the financial markets infrastructure as well.
As for foreign participation, only regional institutional investors and fund managers will be targeted due to the size of the issue, which is very small, by international standards.
However, there will be no restriction to participation by investors outside EAC region.
Treasury Bonds issued between 2008 and 2011 amounted to Rwf 31 billion. A big part of this has been paid back, only a stock of Rwf 8.5 billion is not yet retired.
In the past, the subscription level was at 197% in average and the price ranged between 8% and 11.5%.
The National Bank of Rwanda will undertake book-building method. Book building is a process by which potential investors (mainly institutional investors) determine the demand and the price of a proposed issue of securities through public bidding.
It facilitates to discover prices and quantity before issue and is the most efficient way to elicit information from investors in terms of a correct bond valuation.
Source: {gov.rw}
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