Rwanda reopens high-value bonds to boost long-term investment opportunities

Rwanda's government recently made a strategic move to reopen high-value government bonds, including the FXD3/2019/20Yrs maturing in 2039 and FXD6/2020/20Yrs maturing in 2040, with coupon rates of 13.25 per cent and 13.15 per cent respectively. This decision was aimed at attracting long-term investments from both institutional and retail investors in the market. Kevin Karobia, Senior Research Investment Analyst at BK Capital, joined CNBC Africa to delve into these developments and shed light on the market's performance. Karobia highlighted the factors that drove the government's decision to increase the issuance size of these specific bonds rather than issuing new bonds with different maturity dates. He explained that the move aimed to bring down price volatility and align with the government's debt requirements for the year. The reopening of these bonds in January and February was a pre-planned strategic move to cater to the domestic market's needs for longer tenures. Despite the reopening of the bonds, last week saw limited market activity with no bids or offers on most of the bonds. Karobia noted that this trend is not uncommon in the Rwandan bond market, where a few large institutional players dominate the trading space. These investors select bonds based on their outlooks and portfolio structures, contributing to the market's efficiency. When compared to the regional bond market performance, Rwanda faces challenges in attracting investors due to lower interest rates than its neighboring countries. The country's yield curve indicates tough competition in the region, especially with high-interest rates in countries like Kenya and Uganda. Looking ahead, Karobia anticipates an increase in market activity as Rwanda enters the earnings season. He expects companies like MTN and INM to drive trading activity with dividend announcements and performance reports. The banking sector, represented by Bank of Kigali and INM Bank, shows strong performance with stable interest rates and growing interest income. Banks have capitalized on cheaper deposits, leading to lower cost of funds and higher net interest income. This positive outlook signals healthier bottom lines for banks in 2024, translating to consistent dividend payments for equity investors. Karobia concludes that Rwandan banks present promising investment opportunities for investors seeking reliable returns. The reopening of high-value bonds, coupled with the favorable performance of the banking sector, sets a positive tone for Rwanda's financial market in the coming months.