The Treasury bond, which was listed on the Rwanda Stock Exchange (RSE) last week, was oversubscribed on the primary market as investors expressed high appetite for the virtually risk free debt.

The bond which was expected to generate Rwf2.5b was oversubscribed by Rwf6.5b, making it the ninth time the central bank is borrowing money on behalf of government from the public through issuance of treasury bonds.

It also raised government debt held in bonds to Rwf16b from Rwf11b in 2010.

The returns on the five-year bond are the highest in the market compared to other treasury bonds listed on the RSE.

The bond pays a coupon rate — the rate of interest paid per year by bond issuers to bondholders — of 11.25 per cent, which analysts said is positioned to beat soaring inflation. The interest payment is, however, conditioned to a withholding tax at five per cent.

Central bank has been listing treasury bonds on the RSE since 2008 to raise long term development capital on behalf of government and also help deepen the bonds market.

 "To sustain macroeconomic stability, the stock market must be looked at and considered as a new possible venture that can accelerate and foster growth,” central bank Governor, Claver Gatete, said, expressing optimism that the bonds would perform well considering the country’s current stable macroeconomic situation.

Rwanda has managed to contain its inflation rate in single digits despite the turbulent regional and global economic situation, which is driven by high fuel and food prices.

"Countries in the region are facing high inflation rates yet Rwanda has been able to control its inflation rate at 7.5 per cent, which is the lowest in the region,” Gatete said.

Robert Mathu, the Executive Director of Capital markets Authority, said that on the backdrop of the bond’s performance on the primary market, it is also likely to be successfully subscribed on the secondary market.

"The subscription shot above 360 per cent, indicating the strong appetite that the market has to invest in bonds,” he said.

Although all treasury bonds that have been listed on the RSE were oversubscribed, participation of retail investors has always been negligible as the bond market is dominated by institutional investors like banks, insurance companies and the public pension body, Social Security Fund of Rwanda. 

"In order to raise as much income from the bonds and for everybody to benefit, there are financial literacy campaigns informing the public that anyone can invest and gain in the stock market,” Mathu said.

Government also plans to issue bonds in the international capital market to raise money to finance its infrastructure projects that are critical to attract Foreign Direct Investments although the decision may be considered in the next three years.

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