Why This Matters
Government bonds are the backbone of Angola’s capital markets. The domestic debt market is far larger than the equity market — the government has over Kz 15 trillion in outstanding bonds and bills. For most Angolan investors, bonds will be the first and often the largest holding in their portfolio. Understanding how they work is not optional — it is essential.
What Is a Bond?
A bond (obrigação) is a loan you make to the government (or a corporation). When you buy a government bond, you are lending money to the Republic of Angola. In return, the government promises to:
- Pay you regular interest (coupon / cupão) — typically every 6 months
- Return your principal (face value / valor nominal) at a specified future date (maturity / vencimento)
It is a contract: you provide capital now, and the government pays you income over time plus your money back at the end.
Types of Angolan Government Debt
Treasury Bills (Bilhetes do Tesouro — BT)
Short-term: 91 days, 182 days, or 364 days to maturity Zero-coupon: No periodic interest payments. Instead, you buy at a discount and receive face value at maturity. Current yield: The 91-day BT yields approximately 18.5%
How it works: You buy a 91-day BT with Kz 1,000,000 face value for approximately Kz 955,000. After 91 days, you receive Kz 1,000,000. The Kz 45,000 difference is your interest income.
Best for: Short-term parking of cash, building an emergency fund with some yield, investors who want minimal commitment.
Treasury Bonds (Obrigações do Tesouro — OT)
Longer-term: 2, 3, 5, 7, or 10 years to maturity Coupon-bearing: Pay regular interest (semi-annual or annual) Current yields: 20-22% for Kwanza-denominated; 7-9% for USD-indexed
How it works: You buy a 5-year OT with Kz 1,000,000 face value at a 21% annual coupon, paid semi-annually. Every 6 months, you receive Kz 105,000 in interest. After 5 years, you receive your Kz 1,000,000 principal back. Total income over 5 years: Kz 1,050,000.
Best for: Long-term income investors, portfolio anchoring, retirement planning.
USD-Indexed Bonds
Denominated in Kwanza but indexed to the US dollar. If the Kwanza depreciates against the dollar during the bond’s life, the coupon and principal payments adjust upward in Kwanza terms.
Current yields: 7-9% (lower than Kwanza OTs because they carry less currency risk) Best for: Investors concerned about Kwanza depreciation, diaspora investors, hedging currency exposure.
Bond Pricing: Par, Premium, and Discount
Bonds have two prices:
- Face value (valor nominal): The amount printed on the bond — typically Kz 1,000,000. This is what you get back at maturity.
- Market price (preço de mercado): What buyers and sellers agree on in the secondary market.
At par: Market price = Face value. A Kz 1,000,000 bond trading at Kz 1,000,000. At a premium: Market price > Face value. Trading at Kz 1,020,000 — investors are willing to pay extra because the coupon rate is higher than current market rates. At a discount: Market price < Face value. Trading at Kz 980,000 — the coupon rate is below current market rates.
The critical relationship: Bond prices and yields move in opposite directions. When yields rise, prices fall. When yields fall, prices rise. This is not opinion — it is mathematical law.
How Bond Auctions Work
The primary market is where new bonds are first sold. The BNA and Ministry of Finance conduct regular auctions through BODIVA:
- Announcement: BODIVA publishes auction details — bond type, maturity, face value, auction date
- Bidding: Licensed brokers submit bids on behalf of their clients, specifying how much they want to buy and at what yield
- Allocation: Bonds are allocated to the lowest yield (highest price) bidders first until the total offering is filled
- Settlement: T+2 settlement through CEVAMA — you pay through your bank account and bonds appear in your custody account within 2 business days
Retail investors typically participate through their broker, who handles the bidding process. You specify the amount you want to invest and your broker submits appropriate bids.
Worked Example: Your First Bond Purchase
Teresa wants to buy her first government bond. She has Kz 5,000,000 in her BAI brokerage account.
She chooses: 3-year treasury bond (OT), 20% coupon, semi-annual payments, face value Kz 5,000,000.
Purchase:
- Face value: Kz 5,000,000
- Purchase price: Kz 4,900,000 (buying at a slight discount = 98% of par)
- Brokerage commission (0.35%): Kz 17,150
- Total cost: Kz 4,917,150
Income stream:
- Semi-annual coupon: Kz 5,000,000 × 20% ÷ 2 = Kz 500,000 every 6 months
- Annual coupon income: Kz 1,000,000
- IAC withholding tax (5% for bonds > 3 years): Kz 50,000 per year
- Net annual income: Kz 950,000
At maturity (3 years):
- Total coupons received (net): Kz 950,000 × 3 = Kz 2,850,000
- Principal returned: Kz 5,000,000
- Capital gain (bought at discount): Kz 100,000
- Total return: Kz 2,950,000 on Kz 4,917,150 invested = ~60% total over 3 years, or ~17.5% annualized after tax
Yield to Maturity: Using the Bond Yield Calculator, Teresa’s YTM is approximately 21.3% — higher than the 20% coupon because she bought below par.
Key Takeaways
- Bonds are loans to the government — you provide capital and receive interest income plus principal at maturity
- Angola has two main types: treasury bills (short-term, zero-coupon) and treasury bonds (longer-term, coupon-paying)
- USD-indexed bonds offer lower yields but protection against Kwanza depreciation
- Bond prices and yields move inversely — this is the most important relationship in fixed-income investing
- New bonds are bought through BODIVA auctions via licensed brokers
- Government bonds are the lowest-risk investment in Angola and the foundation of most portfolios
- After-tax yields of 17-20% are achievable and significantly exceed bank deposit rates
Common Mistakes
Confusing coupon rate with yield — The coupon is the stated interest rate. Yield-to-maturity accounts for the purchase price, coupon, and time to maturity. If you buy a 20% coupon bond at a premium (above face value), your actual yield is less than 20%.
Ignoring reinvestment — When you receive coupon payments, they need to be reinvested to achieve the full compound return. Cash sitting idle in your bank account earns much less.
Selling before maturity without understanding price risk — If interest rates rise after you buy, your bond’s market price falls. Selling early could result in a capital loss. If you can hold to maturity, you get full face value regardless of interim price movements.
What’s Next
Bonds provide income and stability. But for growth, you need equities. The next lesson explains how stocks work on BODIVA — what it means to own shares, how prices are determined, and how to evaluate Angola’s listed companies.
Next Lesson: How Stocks Work — Owning a Piece of Angola’s Future
Explore the Bond Dashboard for current yields and auction data. Use the Bond Yield Calculator to analyze any bond’s return.