The number of individual investors in government-issued treasury bonds has grown from 0 to 10%, Central Bank Chief Economist, Prof. Thomas Kigabo says.
A Treasury bond (T-bond) is a common choice among investors with low-risk tolerances or a focus on generating income.
For the past four years, the government through Central Bank has been issuing quarterly Treasury bond. However, corporate companies such as banks with high liquidity have been taking the largest share of investment into the bonds.
For instance, between 2013 and 2017, Institutional investments in bonds led in the demand growth from 18.8% (2013) to 57.6% (2017) while retailers grew from 0.1% to 5.8% in the same period.
Speaking during a training on Central Bank’s new Monetary Policy framework at Lemigo Hotel in the capital Kigali on Monday this week, Prof. Kigabo said the growth in individual or retail investor into government Treasury Bonds is attributed to Central Bank’s continued efforts to provide multiple investment choices for Rwandans and corporate companies.
“With several products in place, people think before investing by looking at where there is favourable interest rates. We want to continue supporting this dynamic in the economy,” Prof. Kigabo said.
According to Prof. Kigabo, people don’t focus on immediate profit margins when planning to invest. They focus on 1-2 years profit, he said.
Under the new monetary policy framework, Prof. Kigabo said, “we shall provide timely information on interest rates in the money markets to help people take decisions,” he said.
Which Bonds has Rwanda been issuing?
Rwanda Government has been issuing a range of quarterly treasury bonds such as 3-year, 10-year and 15-year bonds.
Bidders have been buying these via Central Bank’s book building method whereby the minimum for competitive bidders was fixed at Rwf50 million and Rwf100, 000 for non-competitive bidders.
A 10-year Treasury note pays interest at a fixed rate once every six months, and pays the face value to the holder at maturity date.
The purpose of treasury bills is to help finance the national debt as well as a way for the government to make money from the public.