The EUR-indexed Obrigacao do Tesouro Indexada (OTX) provides Angolan sovereign bond exposure with built-in protection against Kwanza depreciation relative to the Euro. Coupon and principal payments are adjusted for movements in the AOA/EUR exchange rate, making this instrument a Euro-return vehicle settled within Angola’s domestic market infrastructure. It is the complement to the USD-indexed OTX and serves investors with Euro-denominated income, liabilities, or performance benchmarks.
| Indicator | Value | Change |
|---|---|---|
| Indicative Coupon | ~7–9% | — |
| Reference Currency | EUR (AOA/EUR) | — |
| BNA Policy Rate | 17.5% | — |
| Inflation (YoY) | ~15.7% | — |
| Minimum Investment | AOA 1,000 | — |
| IAC Tax Rate | 10% | — |
How the EUR-Indexed OTX Works
The EUR-indexed OTX is denominated and settled in Kwanza, but the effective face value is pegged to a Euro-equivalent amount based on the BNA reference AOA/EUR exchange rate at issuance. At each semi-annual coupon date (cupao semestral), the coupon payment is calculated by applying the stated coupon rate to the original EUR-equivalent principal, then converting the result to Kwanza at the prevailing exchange rate. At maturity, the same conversion applies to the principal redemption.
The indexation mechanism operates identically to the USD OTX but references the AOA/EUR rate rather than AOA/USD. If the Kwanza depreciates against the Euro between issuance and a coupon date, the Kwanza-equivalent coupon increases; if the Kwanza appreciates, the Kwanza payment decreases. The investor’s return in Euro terms is therefore largely insulated from Kwanza exchange-rate volatility.
Settlement occurs T+2 through BODIVA’s Sistema de Liquidacao de Titulos, and all bonds are held in dematerialized form at the Central de Valores Mobiliarios. Issuance takes place via competitive auctions managed by the BNA, with non-competitive bids accepted at the weighted-average yield. The minimum investment is AOA 1,000.
Current Market Context
Angola’s economic ties with Europe – particularly Portugal, its largest European trading partner – generate significant Euro-denominated trade flows. The BNA publishes a daily AOA/EUR reference rate, and the Kwanza has generally depreciated against the Euro in line with its weakening against the Dollar, though the magnitude differs because the EUR/USD cross rate adds an additional variable.
With the BNA policy rate at 17.5% and inflation at approximately 15.7% (Instituto Nacional de Estatistica), the EUR OTX’s nominal coupon of 7–9% appears modest next to OTNR yields of 20–22%. However, as with the USD variant, the total return includes the FX adjustment. If the Kwanza depreciates by 8–12% annually against the Euro, the effective Kwanza return on a EUR OTX with an 8% coupon could reach 16–21%, narrowing or eliminating the gap with OTNR returns while providing Euro purchasing-power preservation.
The EUR-indexed OTX market is smaller than its USD counterpart, reflecting the dominance of the Dollar in Angola’s external transactions. Secondary-market liquidity is accordingly thinner, and new issuances are less frequent.
Who Should Buy
The EUR-indexed OTX is designed for investors with Euro-denominated needs:
- Portuguese and European diaspora investors who earn or spend in Euros and want Angola sovereign exposure without bearing Kwanza depreciation risk against their home currency.
- Companies with European import exposure – businesses that source goods or services from the Eurozone can use EUR OTX bonds as a natural hedge, since the bond’s FX adjustment moves in the same direction as their rising import costs when the Kwanza weakens.
- Portfolio managers diversifying FX risk – Investors who already hold USD-indexed OTX or USD-denominated Eurobonds may want to add EUR exposure for currency diversification within their Angola allocation.
- Domestic investors with a bearish Kwanza/EUR view – Angolan investors who expect the Kwanza to depreciate more sharply against the Euro than against the Dollar may find the EUR OTX more attractive than the USD variant.
Investors without specific Euro exposure needs will generally find the USD-indexed OTX more liquid and more frequently issued. Those who prefer higher nominal coupons and are comfortable with full Kwanza exposure should consider OTNR bonds.
Tax Treatment
The Imposto sobre a Aplicacao de Capitais (IAC) applies at the preferential rate of 10% on coupon income, as EUR-indexed OTX bonds typically have original maturities exceeding three years. The FX adjustment portion of each coupon – attributable to AOA/EUR exchange-rate movement – is generally included in the taxable base. Tax is withheld at source on each semi-annual payment by the custodian bank. As with all OTX securities, investors should confirm the treatment of FX gains on principal redemption at maturity with their custodian or tax adviser.
Comparison to Alternatives
| Feature | EUR OTX | USD OTX | 5-Year OTNR | Eurobond |
|---|---|---|---|---|
| Nominal Coupon | ~7–9% | ~7–9% | ~21.0% | ~8–10% (USD) |
| FX Protection | EUR-indexed | USD-indexed | None | USD-denominated |
| IAC Tax Rate | 10% | 10% | 10% | N/A (offshore) |
| Liquidity | Low | Moderate | Moderate-high | Moderate |
| Minimum | AOA 1,000 | AOA 1,000 | AOA 1,000 | ~USD 200,000 |
The EUR OTX shares the same structural benefits as the USD variant – FX protection, local settlement, low minimum – but references the Euro instead of the Dollar. Its lower liquidity is the primary drawback. Against OTNR bonds, the trade-off is identical to the USD OTX: a lower nominal coupon in exchange for exchange-rate insulation. Against Eurobonds, the EUR OTX provides a Euro-oriented return from within the domestic yield curve framework, without requiring international brokerage access or the typical USD 200,000 minimum.
How to Buy
- Primary auction – Submit competitive or non-competitive bids through an authorized primary dealer before the BNA auction deadline. EUR OTX issuance dates are included in the quarterly calendario de emissoes, though they may be less frequent than USD OTX or OTNR auctions.
- 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 EUR-indexed OTX bonds trade on the mercado secundario. Liquidity is the thinnest among Angola’s domestic sovereign instruments; investors should be prepared for wider bid-ask spreads and potentially limited availability of specific series.
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 any applicable repatriation procedures through their custodian before participating.