The 5-year Obrigacao do Tesouro Nao Reajustavel (OTNR) sits at the middle of Angola’s domestic fixed-rate sovereign curve, bridging the shorter 3-year OTNR and the longer-dated 7- and 10-year issues. At an indicative yield of approximately 21.0%, it provides a meaningful pick-up over the bill market while qualifying for the preferential 10% Imposto sobre a Aplicacao de Capitais (IAC) tax rate.
| Indicator | Value | Change |
|---|---|---|
| Current Yield | ~21.0% | — |
| BNA Policy Rate | 17.5% | — |
| Coupon Frequency | Semi-annual | — |
| Inflation (YoY) | ~15.7% | — |
| Minimum Investment | AOA 1,000 | — |
| IAC Tax Rate | 10% | — |
How the 5-Year OTNR Works
The 5-year OTNR is a fixed-rate, Kwanza-denominated government bond. The coupon rate – currently around 21.0% annualized – is set at the time of issuance and does not change regardless of subsequent moves in inflation, exchange rates, or the BNA policy rate. Coupon payments of approximately 10.5% of face value are made every six months (cupao semestral), and the full principal is redeemed at maturity.
The bond is issued through competitive auctions conducted by the BNA on behalf of the Ministerio das Financas. Primary dealers submit yield bids; non-competitive bids are also accepted at the weighted-average yield. Settlement follows T+2 conventions through BODIVA’s clearing and settlement infrastructure. Securities are held in dematerialized form at the Central de Valores Mobiliarios, and the minimum investment is AOA 1,000.
Over a 5-year holding period, an investor in AOA 1,000,000 face value at a 21.0% coupon would receive approximately AOA 105,000 in gross coupon income every six months – ten payments totaling AOA 1,050,000 – plus the return of the AOA 1,000,000 principal. After the 10% IAC withholding on coupons, net coupon income would total approximately AOA 945,000.
Current Market Context
With the BNA reference rate at 17.5% and headline inflation at approximately 15.7% (Instituto Nacional de Estatistica), the 5-year OTNR’s gross yield of 21.0% offers a 350-basis-point spread over the policy rate. The after-tax net yield of roughly 18.9% provides a positive real return margin of over 300 basis points against current CPI, assuming inflation does not re-accelerate over the holding period.
The 5-year point on the curve is where duration risk becomes more meaningful. A 100-basis-point parallel shift in yields would produce a price move of roughly 4%, compared to approximately 2.5% for the 3-year OTNR. Investors extending from three to five years should be comfortable with this additional mark-to-market volatility or plan to hold to maturity.
Demand for the 5-year tenor has been solid at recent auctions, with bid-to-cover ratios generally above 2.0x. Institutional investors – particularly pension funds building long-duration portfolios – have been active buyers as Angola’s capital markets deepen.
Who Should Buy
The 5-year OTNR is appropriate for long-term institutional investors – pension funds, insurance companies, and endowments – that need to match multi-year Kwanza-denominated liabilities. It also appeals to retail investors with a firm five-year horizon who want to lock in yields well above current inflation while benefiting from the 10% preferential IAC rate.
Investors uncertain about their liquidity needs over a five-year window may prefer the 3-year OTNR, which offers a similar tax advantage with less duration exposure. Those concerned about Kwanza depreciation over this longer horizon should evaluate FX-indexed OTX bonds as an alternative or complement.
Tax Treatment
The Imposto sobre a Aplicacao de Capitais (IAC) applies at the reduced rate of 10% on coupon income. Because the 5-year OTNR’s original maturity exceeds the three-year statutory threshold, investors benefit from the preferential rate rather than the standard 15% applied to shorter instruments such as treasury bills and the 2-year OTNR. Tax is withheld at source on each semi-annual coupon payment. Over ten coupon periods, the cumulative tax savings relative to a 15%-taxed instrument on the same gross yield are substantial.
Comparison to Alternatives
| Feature | 3-Year OTNR | 5-Year OTNR | 7-Year OTNR | USD OTX |
|---|---|---|---|---|
| Gross Yield | ~20.5% | ~21.0% | ~21.5% | ~7–9% + FX |
| Net Yield (after IAC) | ~18.5% | ~18.9% | ~19.4% | ~6–8% + FX |
| IAC Tax Rate | 10% | 10% | 10% | 10% |
| Duration Risk | Moderate-high | High | Very high | High |
| Currency Hedge | None | None | None | USD-indexed |
Moving from the 3-year to the 5-year OTNR adds approximately 50 basis points in gross yield and roughly 40 basis points after tax, while increasing duration risk significantly. The 7-year OTNR offers a further 50-basis-point step-up but extends the commitment by two additional years. Investors prioritizing exchange-rate protection should compare against OTX USD-indexed and EUR-indexed alternatives.
How to Buy
- Primary auction – Submit competitive or non-competitive bids through an authorized primary dealer before the BNA auction deadline. The quarterly calendario de emissoes sets out scheduled dates and indicative volumes.
- Portal do Investidor – BODIVA’s online platform allows registered individuals to place non-competitive orders for new issuances and to trade on the secondary market.
- Secondary market via BODIVA – Outstanding 5-year OTNRs trade on the mercado secundario. Liquidity for benchmark on-the-run series is generally adequate, though off-the-run issues may see wider spreads.
A securities account (conta de titulos) at an authorized custodian bank and a valid Numero de Identificacao Fiscal (NIF) are required.