Biya Regime New Bond: Investors hold steady despite slow start in trading ⁰

During its second trading day on November 24, 2023, 24 hours after being listed on the Central African Securities Exchange (Bvmac), the Cameroon government’s multi-tranche bond for 2023-2031 recorded no transactions.

According to the official market bulletin published by the Cemac Unified Financial Market, various investors expressed interest in acquiring 700 of these bonds during the trading session.

However, the bondholders refrained from selling them. This cautious reaction from Cameroon’s bondholders, according to market observers, may stem from the purchase price (CFA10,000), which currently does not yield any profit for the holder compared to its initial value. The refusal to sell the bond, despite the relatively modest demand (only 700 bonds out of 17.6 million), reflects a certain confidence in the bond, which has just begun trading on the Bvmac and could potentially increase in value over subsequent trading days.

On the first trading day (November 23, 2023), the bondholders used the same approach. In that inaugural session, as revealed by the Bvmac’s official bulletin, 892 bonds were traded out of a demand for 1,592. A reliable source indicates that this trading volume is more related to the commitment of brokerage firms to contribute to the excitement of the very first listing rather than a genuine desire to sell the securities involved.

During the trading sessions on November 23 and 24, 2023, all the purchase offers for bonds that were made and subsequently refused by bondholders concerned longer maturity values (7 years). This is further proof that despite the long maturity period, holders of this category of securities remain confident in the stock’s upward trend in the market.

First time in the Cemac Region

As a reminder, the 2023-2031 bond issuance is the 7th such operation successfully carried out by Cameroon on the sub-regional financial market and the first with multiple tranches experienced in the Cemac zone. Cameroon embarked on this experiment due to increasingly challenging market conditions, with high interest rates resulting from the tightening of monetary policy by the central bank.

This type of operation allows investors the flexibility to subscribe to longer maturities at higher interest rates or shorter maturities at lower interest rates. This flexibility offered to subscribers undoubtedly contributed to the success achieved by Cameroon in this operation, during which the government was able to raise more than the targeted CFA150 billion.

Investors holding these Cameroonian bonds, who do not wish to hold them until maturity, can now sell them on the financial market for cash. Transactions may result in a capital gain or discount, depending on the interest investors show (demand) in the market during trading sessions.

Source: Business in Cameroon