Gov’t bond oversubscribed on primary market

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Gov’t bond oversubscribed on primary market

The results from the Rwanda five-year government bond issued this week on the domestic market have been oversubscribed on primary market to the tune of 232 percent, the highest ever oversubscription recorded by any government bond.

Rwanda Central bank said that this is a sign that Rwandans have started to understand that there are alternative ways of wealth creation by saving long term.

Governor of the National Bank of Rwanda John Rwangombwa noted that the increase participation by local investors compared to the previous bond was down to the public awareness programs that the government has conducted.

“Rwandans have begun to understand that there are alternative ways of wealth creation by saving long term through government securities. We are looking forward to increased secondary market participation,” Governor Rwangombwa said.

Foreign investors from Canada, France, Belgium, Mauritius, Kenya and Tanzania expressed intereste in Bond subscribing 6.1 percent of total bids.

Speaking after the announcement the Minister of Finance and Economic Planning ClaverGatete said that the success of the Treasury bond indicates investors’ confidence in the macroeconomic frame work and the Country’s economic direction.

“To have this bond subscribed by 232 percent with a wide participation is a clear indication of how investors perceive our economy. Our aim is to ensure that we keep this trend by continuing our prudent macroeconomic policies,” Minister Gatete said.

The bond issuance is part of a Government’s comprehensive Treasury bond issuance plan for Fiscal Year 2014/2015. This bond follows a successful 3-year bond issued in February 2014 which was oversubscribed by 140 per cent signaling investor confidence in the outlook for Rwanda’s currency and economy.

This bond provides an additional investment opportunity that is attractive.  It is risk free since it’s guaranteed by government, very liquid as Bonds can be sold anytime on Rwanda Stock Exchange, ensures a good investment return and can be pledged as collateral for any loan.

The bond is set to be traded on the secondary market at the Rwanda Stock Exchange by September 2, 2014

The bond has also been granted tax incentive as withholding tax on interest has been reduced from 15 percent to 5 percent for EAC resident tax payers investing in three years and above.

 

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About the author

Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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