How Angola’s Bond Auctions Work
The primary market is where the Government of Angola issues new debt securities through auctions managed by the Ministry of Finance (MINFIN) and operationally supported by the Banco Nacional de Angola (BNA). Understanding auction mechanics is essential for any investor seeking to access Angola’s high-yield fixed income market, where kwanza bond yields currently range from 18% to 22%.
Auction Format
Angola uses a multiple-price (discriminatory) auction format for most government securities. In this format, successful bidders pay the price they bid rather than a uniform clearing price. This rewards accurate price discovery and penalizes aggressive bidding.
| Feature | BT (Treasury Bills) | OT (Treasury Bonds) |
|---|---|---|
| Pricing | Discount to face value | Fixed coupon at par |
| Bid type | Yield-based | Price-based |
| Minimum bid | AOA 100,000 | AOA 1,000,000 |
| Bid increments | AOA 1,000 | AOA 1,000 |
| Settlement | T+1 | T+2 |
Competitive vs Non-Competitive Bids
The auction process accommodates two types of bids:
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Competitive bids are submitted by institutional investors (banks, pension funds, insurance companies) through the BNA’s electronic auction platform. Each bid specifies a yield (for BTs) or price (for OTs) and a volume. MINFIN ranks competitive bids from lowest yield to highest (or highest price to lowest) and fills them until the target volume is reached. The highest accepted yield becomes the cut-off rate.
-
Non-competitive bids are submitted by retail investors through the Portal do Investidor and by smaller institutional participants. Non-competitive bidders accept the weighted average yield determined by competitive bids. These bids are guaranteed allocation up to the non-competitive tranche, which is typically 10-20% of the total auction volume.
The Auction Process Step by Step
- Announcement — MINFIN publishes the auction notice at least 5 business days before the auction, specifying instrument, volume, coupon (for OTs), and settlement date.
- Bid submission — Competitive bids are submitted electronically through the BNA system, typically between 9:00 and 11:00 Luanda time on auction day. Non-competitive bids via Portal do Investidor must be submitted before the deadline specified in the notice.
- Allocation — MINFIN reviews bids and determines the cut-off yield. All competitive bids at or below the cut-off are accepted. Non-competitive bids are filled at the weighted average rate.
- Results publication — Auction results are published on the MINFIN website and through BODIVA bulletins on the same day, including the total amount allotted, cut-off yield, weighted average yield, and bid-to-cover ratio.
- Settlement — Securities are delivered to investors’ accounts at CEVAMA (the central securities depository) and cash settlement occurs through the BNA payment system.
Allocation and Pricing Nuances
MINFIN retains discretion over the final allotment. If bids are clustered at yields MINFIN considers too high, it may choose to allot less than the indicative volume. This has occurred in periods of monetary policy uncertainty when the gap between BNA’s policy rate (currently 17.5%) and market-demanded yields has widened.
For investors participating through the Portal do Investidor, the non-competitive mechanism removes the complexity of price discovery. The trade-off is that the investor accepts the market-clearing rate rather than potentially obtaining a more favorable yield through competitive bidding.
The auction calendar provides the upcoming schedule, while demand/cover ratios track the strength of investor demand at recent auctions.