Overview
OTNR (Obrigações do Tesouro Não Reajustáveis) are fixed-rate, kwanza-denominated Treasury bonds issued by the Republic of Angola through MINFIN. The “Não Reajustáveis” designation (non-readjustable) indicates that these bonds pay a fixed coupon rate that does not adjust for inflation or exchange rate movements, distinguishing them from the OTX (FX-indexed) variant. OTNRs are a core component of Angola’s sovereign debt market and trade on BODIVA.
Instrument Characteristics
| Feature | Detail |
|---|---|
| Issuer | Republic of Angola (MINFIN) |
| Currency | Angolan kwanza (AOA) |
| Coupon | Fixed rate, paid semi-annually or annually |
| Maturities | 2, 3, 5, 7, and 10 years |
| Auction agent | BNA |
| Trading venue | BODIVA secondary market |
| Custody | CEVAMA |
| Settlement | T+1 or T+2 |
Pricing and Yield Dynamics
OTNR yields are determined by multiple factors:
- BNA policy rate: At 17.5% (cut from 18.5% on January 14, 2026), the policy rate establishes the floor for OTNR pricing. Shorter-dated OTNRs typically price near the policy rate plus a term premium, while longer maturities incorporate additional duration risk.
- Inflation expectations: With the INE reporting 15.7% CPI inflation (December 2025), OTNR coupon rates must exceed inflation to deliver positive real returns. The spread between OTNR coupons and inflation represents the real yield available to investors.
- Supply and demand: MINFIN’s issuance volume and the demand from banks, insurers, and institutional investors determine auction clearing rates.
- Sovereign credit risk: Angola’s ratings (S&P B- / Moody’s B3 / Fitch B-) reflect the credit premium embedded in OTNR yields.
Investment Profile
OTNRs offer several distinct characteristics for portfolio construction:
Advantages
- Predictable cash flows: Fixed coupons provide certainty on nominal income, facilitating asset-liability matching for banks and insurers
- Higher yields: OTNRs typically offer higher nominal yields than Bilhetes do Tesouro (which are zero-coupon and short-term), compensating for duration and inflation risk
- Duration exposure: Maturities of 2-10 years allow investors to express views on the interest rate cycle and potentially benefit from capital gains if rates decline
Risks
- Inflation risk: Fixed coupons do not adjust for inflation, meaning real returns erode if CPI exceeds expectations. At 15.7% inflation, the real yield margin is compressed.
- Currency risk: As kwanza-denominated instruments, OTNRs expose foreign investors to USD/AOA depreciation risk (rate at 914.60). Investors seeking FX protection should consider OTX bonds instead.
- Liquidity risk: Secondary market trading for longer-dated OTNRs may be less liquid than for Bilhetes do Tesouro, particularly for 7-10 year maturities
- Reinvestment risk: Coupon payments must be reinvested at prevailing market rates, which may be lower if the BNA continues its easing cycle
Comparison with OTX
| Feature | OTNR | OTX |
|---|---|---|
| Coupon | Fixed kwanza rate | Variable, FX-indexed |
| Currency protection | None | Yes (indexed to USD/EUR) |
| Inflation hedge | No | Partial (via FX component) |
| Target investor | Domestic, kwanza-focused | FX-sensitive, foreign investors |
Investor Considerations
OTNRs are appropriate for investors with a constructive view on the kwanza, expectations of declining inflation, or a need for fixed-income duration in kwanza terms. The January 2026 BNA rate cut (from 18.5% to 17.5%) suggests the beginning of an easing cycle, which — if sustained — would generate capital gains on existing fixed-rate OTNRs as yields fall. However, investors must weigh this rate outlook against ongoing inflation (15.7%), oil price risk affecting fiscal stability (Brent at ~$74.50/bbl, debt-to-GDP at 59.9%), and the structural oil dependency that drives macroeconomic volatility. OTNRs should be analyzed as part of a broader sovereign debt allocation that may also include Bilhetes do Tesouro for liquidity and OTX for currency protection.