The government’s quarterly bond issuances have had a significant impact on the development of the local capital markets, attracting more retail investors, a central bank official has said. 

Chantal Kasangwa, the National Bank of Rwanda director general for operations, said the Treasury bond issuance programme which started in 2014 has also helped widened the investor base.

"Before 2014, banks were the main investors at over 90 per cent participation level, while institutional investors were less than 10 per cent. There were no retail investors in government paper, but this has since changed,” Kasangwa said.

She said retail investors in bonds have increased from one per cent in February 2014 to 9.8 per cent in February this year. Institutional investors constituted 53.2 per cent in the February bond issue compared to less than 10 per cent in 2014, she added. However, banking sector’s participation has declined from 90 per cent to an average of 45 per cent in the past two years.

Kasangwa was speaking ahead of the forthcoming Rwf10 billion 15-year Treasury bond (TB) issuance scheduled for May 25. This will be the ninth bond to be issued under the government’s quarterly issuance programme. The last Rwf15 billion bond, which was issued in February, was oversubscribed by 226 per cent.

Kasangwa said the forthcoming bond issue will, like the previous ones, be used to develop the capital markets "by availing more products on market” and finance key infrastructure projects.

She added that it is also aimed at supporting government’s efforts to promote the savings culture among Rwandans. She noted that it is important to build reliable market mechanisms to strengthen the equity and bond markets to attract more firms to list on the bourse.

Kasangwa added that debt instruments have enabled government to implement long-term projects in the short to medium-term since the quarterly TB issuance programme began.

Commenting on the pending bond issue, Robert Mathu, the Capital Market Authority chief executive officer, said the bond issuance programme plays a key role in supporting efforts geared at increasing locally-generated funds to finance the national budget. He added that the programme has also boosted the country’s capital market by diversifying product offerings.

He noted that the increasing appetite for government paper among domestic retail investors and institutional investors (domestic and regional) indicates confidence in the local bond market and economy, generally.

According to the central bank notice, the Rwf10 billion bond’s coupon (interest) rate will be determined at the closure of the book-building process on May 25. The bond will be redeemed on May 9, 2031. Interested investors can submit their bids to the National Bank of Rwanda through licensed commercial banks or capital market intermediaries, the BNR notice indicates.

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