Obrigacoes do Tesouro Indexadas (OTX) are foreign-currency-indexed government bonds issued by the Ministerio das Financas through the Banco Nacional de Angola (BNA). Unlike OTNR bonds, which pay fixed Kwanza-denominated coupons, OTX bonds adjust both principal and coupon payments for movements in the Kwanza exchange rate against a reference currency – either the US Dollar or the Euro. This mechanism provides built-in protection against desvalorizacao cambial (currency depreciation), making OTX bonds a key instrument for investors seeking to preserve the hard-currency value of their Angolan sovereign holdings.
How OTX Bonds Work
OTX bonds are settled and denominated in Angolan Kwanza, but the payment amounts are indexed to a foreign-currency reference rate. At each coupon date and at maturity, the Kwanza amount owed is recalculated based on the prevailing BNA exchange rate relative to the rate at issuance. If the Kwanza has depreciated against the reference currency, the Kwanza-equivalent coupon and principal increase proportionally; if the Kwanza has appreciated, the payments decrease.
In practical terms, this means OTX bonds behave like foreign-currency instruments from a return perspective, while remaining within the domestic settlement infrastructure. All transactions occur in Kwanza through BODIVA’s Sistema de Liquidacao de Titulos, and securities are held at the Central de Valores Mobiliarios. The minimum investment is AOA 1,000.
The coupon rates on OTX bonds are substantially lower than those on comparable-maturity OTNRs – typically in the range of 7–9% – because the FX-indexation component provides an additional return (or loss) based on exchange-rate movements. The total return to the investor is the sum of the stated coupon plus any exchange-rate adjustment.
Available Variants
Two OTX variants are currently offered:
| Variant | Reference Currency | Indicative Coupon | IAC Tax Rate |
|---|---|---|---|
| USD-Indexed OTX | US Dollar (AOA/USD) | ~7–9% | 10% |
| EUR-Indexed OTX | Euro (AOA/EUR) | ~7–9% | 10% |
Both variants carry the preferential 10% Imposto sobre a Aplicacao de Capitais (IAC) rate because their original maturities typically exceed three years.
Who Should Buy
OTX bonds are particularly attractive to three investor profiles:
- Foreign investors and diaspora participants – Individuals or institutions earning in USD or EUR who want Angola sovereign exposure without bearing full Kwanza depreciation risk. The FX indexation ensures that returns are meaningful in hard-currency terms.
- Domestic investors hedging FX risk – Angolan institutions and individuals who hold import-linked liabilities or who simply want to diversify away from pure Kwanza-denominated instruments can use OTX bonds as a partial currency hedge within the local bond market.
- Conservative long-term investors – Those who believe that Kwanza depreciation is likely over a multi-year horizon may prefer OTX bonds to OTNR bonds, even though OTNRs offer higher nominal coupons, because the real-return risk embedded in Kwanza depreciation is mitigated.
Investors who are confident that the Kwanza will remain stable or appreciate may find OTNRs more rewarding, given their significantly higher nominal yields. The choice between OTX and OTNR is fundamentally a view on future exchange-rate dynamics.
Tax Treatment
The Imposto sobre a Aplicacao de Capitais (IAC) applies at 10% on coupon income for OTX bonds with original maturities exceeding three years. The FX adjustment component of the payment – the portion attributable to exchange-rate movement – is generally treated as part of the taxable income. Tax is withheld at source on each semi-annual coupon payment. Investors should consult their custodian or tax adviser to confirm the treatment of exchange-rate gains on principal at maturity.
Comparison to Alternatives
| Feature | OTNR (5-Year) | OTX USD | OTX EUR | Eurobond |
|---|---|---|---|---|
| Nominal Coupon | ~21.0% | ~7–9% | ~7–9% | ~8–10% |
| FX Protection | None | USD-indexed | EUR-indexed | USD-denominated |
| IAC Tax Rate | 10% | 10% | 10% | N/A (offshore) |
| Settlement | BODIVA (Kwanza) | BODIVA (Kwanza) | BODIVA (Kwanza) | International (USD) |
| Minimum Investment | AOA 1,000 | AOA 1,000 | AOA 1,000 | USD 200,000 |
OTX bonds occupy a middle ground between pure-Kwanza OTNR bonds and offshore Eurobonds. They provide FX protection within the domestic market infrastructure, with a much lower minimum investment than Eurobonds and without the need for an international brokerage account. For investors who want Angola sovereign credit exposure with exchange-rate insulation but prefer to operate within the local yield curve framework, OTX bonds are the primary instrument.
How to Buy
- Primary auction – Submit competitive or non-competitive bids through an authorized primary dealer during the BNA auction window. OTX issuance dates are included in the quarterly calendario de emissoes.
- Portal do Investidor – BODIVA’s online platform allows registered individuals to place non-competitive orders for new issuances and to access the secondary market.
- Secondary market via BODIVA – Outstanding OTX bonds trade on the mercado secundario. Liquidity for OTX issues is generally thinner than for OTNR bonds, reflecting the smaller outstanding stock, so investors should expect wider bid-ask spreads.
A securities account (conta de titulos) at an authorized custodian bank and a valid Numero de Identificacao Fiscal (NIF) are required. Non-resident investors should verify eligibility and repatriation procedures through their custodian before participating.