The 7-year Obrigacao do Tesouro Nao Reajustavel (OTNR) occupies the long end of Angola’s domestic fixed-rate sovereign curve, sitting between the 5-year OTNR and the benchmark 10-year OTNR. At an indicative yield of approximately 21.5%, it delivers one of the highest nominal coupons available in the Kwanza-denominated government bond market while qualifying for the preferential 10% Imposto sobre a Aplicacao de Capitais (IAC) rate.

How the 7-Year OTNR Works

The 7-year OTNR is a fixed-rate, Kwanza-denominated sovereign bond. The coupon – currently around 21.5% annualized – is locked at issuance and remains constant for the full seven-year term. Semi-annual coupon payments (cupao semestral) of approximately 10.75% of face value are distributed every six months, with the full principal returned at maturity.

The Ministerio das Financas issues 7-year OTNRs through competitive auctions managed by the BNA. Primary dealers (operadores de mercado primario) submit yield-based bids; the BNA fills from lowest yield upward until the target issuance volume is reached. Non-competitive bids at the weighted-average yield are accepted as well. Settlement is T+2 through BODIVA’s clearing infrastructure, and all securities are held in dematerialized form at the Central de Valores Mobiliarios. The minimum investment is AOA 1,000.

Over the full seven-year holding period, an investor holding AOA 1,000,000 in face value at 21.5% would receive fourteen semi-annual coupon payments of approximately AOA 107,500 each, totaling AOA 1,505,000 in gross coupon income before the return of principal. After the 10% IAC withholding, net coupon income would total roughly AOA 1,354,500.

Current Market Context

With the BNA policy rate at 17.5% and year-on-year inflation at approximately 15.7% (Instituto Nacional de Estatistica), the 7-year OTNR’s gross yield of 21.5% provides a 400-basis-point spread over the policy rate. The after-tax net yield of roughly 19.4% exceeds current inflation by approximately 370 basis points, offering one of the stronger real return profiles in the domestic fixed-income market – provided inflation does not re-accelerate over the holding period.

Duration risk at the 7-year point is substantial. A 100-basis-point parallel shift in yields would produce a price change of approximately 5.5%, making the 7-year OTNR significantly more volatile on a mark-to-market basis than the 3-year or 5-year tenors. Investors who plan to hold to maturity can disregard interim price fluctuations, but those who may need to sell before maturity should be aware of the potential for capital losses in a rising-rate environment.

Auction demand for the 7-year has historically been thinner than for shorter tenors, reflecting the limited pool of institutional investors comfortable with long-duration Kwanza exposure. Bid-to-cover ratios have typically ranged from 1.5x to 2.0x.

Who Should Buy

The 7-year OTNR is designed for investors with genuinely long-term Kwanza-denominated liabilities. Pension funds building duration-matched portfolios and insurance companies with multi-year policy obligations are the primary institutional buyers. Retail investors should only consider the 7-year if they have a firm commitment to holding through maturity and are comfortable with the inflation uncertainty embedded in a seven-year nominal instrument.

Investors who want long-duration Angolan sovereign exposure but are concerned about Kwanza depreciation should evaluate FX-indexed OTX bonds as an alternative. Those who prefer somewhat less duration risk at the same 10% IAC rate may find the 5-year OTNR a more balanced choice.

Tax Treatment

The Imposto sobre a Aplicacao de Capitais (IAC) applies at the reduced rate of 10% on coupon income. The 7-year OTNR comfortably exceeds the three-year statutory threshold for the preferential rate, and the tax advantage compounds meaningfully over fourteen coupon periods. Tax is withheld at source on each semi-annual payment by the custodian bank. Compared to instruments taxed at the standard 15% rate – such as treasury bills and the 2-year OTNR – the cumulative tax savings on the 7-year OTNR are significant over the life of the bond.

Comparison to Alternatives

Extending from the 5-year to the 7-year adds roughly 50 basis points in gross yield and about 50 basis points net. The incremental yield pick-up per additional year of duration is declining at this part of the curve, which means the compensation for extending further is becoming less attractive in relative terms. The 10-year OTNR offers a further 50-basis-point step-up, but the additional three years of commitment increase the inflation and reinvestment risk materially. For investors with USD or EUR exposure needs, Angola’s Eurobond market provides an alternative, albeit with different credit-spread dynamics.

How to Buy

1. Primary auction – Submit competitive or non-competitive bids through an authorized primary dealer before the BNA auction deadline. The quarterly calendario de emissoes provides scheduled dates and indicative volumes.
2. Portal do Investidor – BODIVA’s online platform allows registered individuals to place non-competitive orders for new issuances and to access the secondary market.
3. Secondary market via BODIVA – Outstanding 7-year OTNRs trade on the mercado secundario. Liquidity at this tenor is typically thinner than for the 2-year or 3-year OTNR, and bid-ask spreads may be wider, particularly for off-the-run series.

A securities account (conta de titulos) at an authorized custodian bank and a valid Numero de Identificacao Fiscal (NIF) are required for participation.