Rwanda bond over-subscribed 187% amid investor boom

Rwf 15 billion (21.8M) Treasury bond has registered a 187 % subscription level with 59 bids from different categories of investors. Rwanda issued the bond, to seek funds for infrastructure projects including power plants and convention centre.

It’s the 3rd issuance this year.

The National Bank of Rwanda [BNR] announced that the 7 year fixed coupon bond attracted domestic retail investors including Savings and Credit Cooperatives (SACCO’s) have participated.

“SACCO’s participation in the bond market has increased significantly from 3 applications in August 2014 to 10 applications today,” says Jean Marie Rugambwa, principle finance analyst at BNR.

Retailers and individual investors accounted for 1.4%, Banks 45.6% and non-financial institutional investors were allocated 53% of total amount offered, results the Rwanda secondary market calls promising.

“80% of the former bids were dominated institutional investors like banks but now this particular one has shown more appetite from retail investors, which is a good sign by all matrix,” says Celestine Rwabukumba, CEO Rwanda Stock Exchange.

Rwabukumba says the bond will boost activities and promote the development of capital market.

The bond was issued at a discount price of 99.877 as incentive for investors willing to trade their bond on secondary market.

It will be listed on the Rwanda Stock Exchange on Tuesday, December 2, 2014.

The initial price guidance was announced at lower 12s which was later revised to 12.425% -12.5% range.

Central bank governor, John Rwangombwa announced the final price at a yield of 12.5% with an annual coupon rate of 12.475% paid semi-annually.

Subscription level has dropped, since the August 15bn bond saw 234 per cent subscription with 91 bids. BNR owes the decline to the maturity period.

“This is the longest maturity bond on market, we did not expect many individual investors to participate,” says Jean Marie Rugambwa, principle finance analyst at BNR.

The success of bond market in Rwanda is attributed to vigorous awareness campaignson saving and investment.

Meanwhile, investors are confident they will yield good returns from the bond.

“This is a great risk free return and an opportunity to diversify our investment portfolio,” says Maurice Toroitich, Managing Director, Kenya Commercial Bank [Rwanda], one of the commercial banks that bought bonds.

BNR will issue 3 and 10 year maturity bonds on February 23, 2015 and May 25, 2015, this financial year.

By: Lillian Gahima

Source: KT Press