Bond Ladder Strategy — Staggered Maturities for Angola Bonds
The bond ladder strategy spreads investments across multiple maturities, creating a structured portfolio where bonds mature at regular intervals. This approach is particularly well-suited to Angola’s bond market, where limited secondary market liquidity makes it important to have regular access to maturing principal without needing to sell before maturity.
How a Bond Ladder Works
Instead of concentrating all capital in a single maturity (e.g., a 5-year OTNR), the investor distributes the allocation across several rungs of the maturity spectrum. As each rung matures, the proceeds are reinvested into a new bond at the longest maturity in the ladder, maintaining constant exposure to the full yield curve.
Example: 5-Rung Kwanza Bond Ladder
| Rung | Instrument | Maturity | Indicative Yield | Allocation |
|---|---|---|---|---|
| 1 | BT 364-day | 1 year | ~18.5% | 20% |
| 2 | OTNR 2-year | 2 years | ~19.0% | 20% |
| 3 | OTNR 3-year | 3 years | ~19.5% | 20% |
| 4 | OTNR 5-year | 5 years | ~20.5% | 20% |
| 5 | OTNR 7-year | 7 years | ~21.0% | 20% |
Weighted average yield: ~19.7%
When Rung 1 (the BT 364-day) matures in one year, the investor reinvests those proceeds into a new 7-year OTNR, extending the ladder. Each subsequent year, the next rung matures and is reinvested at the long end.
Key Benefits
Liquidity Management
Unlike a concentrated long-dated portfolio, a ladder provides regular access to maturing principal. In Angola’s illiquid secondary market, this is the primary mechanism for accessing invested capital without selling at a discount.
Reinvestment Risk Mitigation
By reinvesting in stages rather than all at once, the ladder averages out interest rate fluctuations. If the BNA cuts its policy rate (17.5%), only the maturing rung is reinvested at the lower rate — the rest of the portfolio continues earning the higher locked-in yields.
Yield Capture
The ladder captures most of the yield curve premium. While a concentrated 7-year position earns ~21.0%, the ladder’s weighted average of ~19.7% sacrifices only 130 basis points while gaining substantially better liquidity and diversification.
Simplicity
The mechanical nature of the ladder — reinvest each maturity at the long end — removes the need for market timing or yield curve speculation.
Ladder Variations
Conservative Ladder (BT-Focused)
For investors prioritizing liquidity and capital preservation:
| Rung | Instrument | Yield |
|---|---|---|
| 1 | BT 91-day | ~17.5% |
| 2 | BT 182-day | ~18.0% |
| 3 | BT 364-day | ~18.5% |
Average yield: ~18.0%. Maximum liquidity with quarterly access to maturing principal.
Aggressive Ladder (OTNR-Focused)
For investors seeking maximum yield with periodic liquidity:
| Rung | Instrument | Yield |
|---|---|---|
| 1 | OTNR 2-year | ~19.0% |
| 2 | OTNR 3-year | ~19.5% |
| 3 | OTNR 5-year | ~20.5% |
| 4 | OTNR 7-year | ~21.0% |
| 5 | OTNR 10-year | ~22.0% |
Average yield: ~20.4%. Higher income but less frequent liquidity events.
Mixed Currency Ladder
For investors wanting both yield and currency protection:
| Rung | Instrument | Yield | Currency |
|---|---|---|---|
| 1 | BT 364-day | ~18.5% | AOA |
| 2 | OTX USD-indexed 2yr | ~7.5% | USD-indexed |
| 3 | OTNR 3-year | ~19.5% | AOA |
| 4 | OTX USD-indexed 5yr | ~8.5% | USD-indexed |
| 5 | OTNR 7-year | ~21.0% | AOA |
This hybrid approach balances kwanza yield (18.5-21.0%) with USD-indexed protection (7.5-8.5%), addressing both income and FX risk.
Implementation Through the Portal do Investidor
Retail investors can build a ladder through the Portal do Investidor:
- Start with available capital divided into equal portions
- Invest each portion in a different maturity at the next available auction
- As each rung matures, reinvest at the longest maturity
- Track coupon payments and maturities via the coupon tracker
Tax Optimization
The ladder structure allows tax optimization: OTNRs with maturities exceeding 3 years qualify for the reduced 10% IAC rate (versus 15%). By weighting the ladder toward longer rungs, investors reduce their effective tax rate. See the tax guide for details.