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AfricaMoney | August 20, 2017

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Bank of Mauritius offers savings bonds to retail investors for total of Rs 2 billion

Bank of Mauritius offers savings bonds to retail investors for total of Rs 2 billion

The five-year Government of Mauritius (GoM) Savings Bonds are being issued to counter excess liquidity in the banking system, boost the savings culture in Mauritius and protect interest income from being eroded by inflation. (Image: Shibani Finance)

Mauritius’ central bank announced the sale of five-year Government of Mauritius (GoM) Savings Bonds to retail investors for a total issued amount of Rs 2 billion, to absorb extra money floating in the economy and counter excess liquidity in the banking system.

Besides, the other objectives of the issuance of GoM Savings Bonds are to boost the savings culture in Mauritius and protect interest income from being eroded by inflation.

The two types of bonds are: five-year GoM Savings Bonds at fixed coupon rate, and five-year GoM Inflation linked Savings Bonds.

Those targeted are Mauritian residents, among whom different individuals from the same family can buy the bonds separately or jointly. Besides, minors can also invest, but they must be represented by a legal guardian.

To allow a large number of small savers to take advantage of these new opportunities, the two types of bonds target individuals with a minimum amount of Rs 50,000 and multiples thereof. The maximum permissible investment per account holder shall be Rs 500,000.

The subscription will be opened for a period of three months as from Wednesday July 23, 2014 and the ceiling of Rs 2 billion can be adjusted upwards depending on demand.

Concerning the interest rate, bonds at fixed coupon rate will carry interest at a fixed rate of 6% per annum while interest on Inflation linked Savings Bonds comprises a fixed rate and the headline inflation rate.

For Inflation Linked Bonds, the headline inflation rates for the twelve months ending October (for interest payment in January) and April (for interest payment in July) in each year shall be used for the calculation of the interest payable.

Interest payment must be done half-yearly on 31st January and 31st July. For the initial 2-coupon payment on January 31, 2015, interest shall accrue from the date of investment until January 30, 2015.

The GoM Saving Bonds will be available for sale in all postal offices and in participating banks such as Bank of Baroda, Banque des Mascareignes Ltee, Bank One Limited, Barclays Bank Mauritius Limited, Habib Bank Limited, Mauritius Post and Cooperative Bank Ltd, Bramer Banking Corporation Ltd, State Bank of Mauritius Ltd, The HongKong and Shanghai Banking Corporation Limited, MCB, AfrAsia Bank Limited, Standard Bank (Mauritius) Ltd, SBI (Mauritius) Ltd, and ABC Banking Corporation Ltd.

It may be noted that all institutions will need to do proper due diligence and abide by the requirements of the AML/CFT guidance notes issued by the Bank of Mauritius.

Bank of Mauritius drew attention to the settlement mechanism for purchases through banks and MPL which shall be effected on same day, and the cut-off for sale shall be 3pm and payments shall reach the Bank before 4pm.

As for the registration of bonds, it shall be recorded in Book Entry Form at the Bank of Mauritius and a statement of account shall be issued to holders.

The central bank must be notified of any transfer of ownership and/or pledge against these bonds.

Comments

  1. Mr Daniel

    Your comment is awaiting moderation.

    I can see that there are two types of bond.
    Does the five-year GoM Inflation linked Savings Bonds provide more interest than the five-year GoM Savings Bonds at fixed coupon rate?
    What is more advantageous for an indivudual investor? Is the Inflation linked Savings bonds risky than the Savings bonds at fixed coupon rate?

    • AfricaMoney

      Thanks for your query! The Bank of Mauritius has advised that potential investors can contact Dr D Doobree (Tel no. 2065606) or Mr P Seeballuck (Tel no. 2023847) for further details. From our side, we can just provide the formula for calculation of interest rate on inflation indexed bonds:

      Interest rate = {y (1+e) +e} x 100
      where y is a fixed rate of 2.0 per cent and e is the headline inflation rate as published by Statistics Mauritius. For example, if the headline inflation rate is 4.0 per cent for October in any given year, interest rate to the beneficiary for a given period in the semester ending January shall be equal to 3.04 per cent, i.e. {2.0 % (1+ 4.0 %) + 4.0 %} x 100 x 1/2.

      You can also note that, for the Inflation Linked Bonds the headline inflation rates for the twelve months ending October (for interest payment in January) and April(for interest payment in July) in each year shall be used for the calculation of the interest payable.

      Finally, bonds at fixed coupon rate will carry interest at the fixed rate of 6% per annum. Comparing both from a safety perspective, both are safe since you will get a guaranteed return of 6% on one, which is above the current inflation rate, and a guaranteed return in excess of prevailing inflation rates on the other. Of course, if inflation is high (as reference, current headline inflation rate is 3.9% for the 12 months ended July 14), then it is possible that the guaranteed return of 6% might get eroded by the decrease in your purchasing power, while if inflation is low, the return on the inflation indexed bonds might not be very lucrative.

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