RBZ introduces US dollar savings bond 

Source: RBZ introduces US dollar savings bond | The Herald September 18, 2019

Dr Mangudya

Tawanda Musarurwa Senior Business Reporter

The Reserve Bank of Zimbabwe (RBZ) has brought to the market a United States dollar-denominated savings bond with an interest rate of 7,5 percent per annum to promote a savings culture among Zimbabweans.

With inflationary pressures having a negative impact on most savings instruments on the local financial services market, the US dollar savings bond is expected to provide a much more sustainable offering.

It is largely expected that the “new” savings bond will help to accelerate the empowerment of the banking public by providing an investment instrument with high-yielding returns as well as offering safe and secure investment.

The US-dollar denominated instrument will complement the existing RTGS dollar/ZWL savings bond, which was introduced in 2017 to “mop up excess liquidity”.

While presenting the 2019 Mid-term Monetary Policy Statement last Friday, central bank governor Dr John Mangudya said the new savings bond will also benefit both individuals and companies that hold nostro foreign currency accounts (FCAs).

“In order to promote a savings culture and to provide reasonable return on FCA nostro account deposits and US dollar cash held by individuals and firms,
the bank is with immediate effect, introducing US dollar-denominated savings bonds alongside the current ZWL$ denominated savings bonds,” said the governor.

The US dollar savings bond will have the following features: Interest rate of 7,5 percent per year; a minimum tenure of one year; tax exemption, in line with Government policy; liquid asset status; tradable; and acceptable as collateral for overnight accommodation by the RBZ.

Meanwhile, Dr Mangudya added that the interest rate on the ZWL$ savings bond will be reviewed, taking into account developments on the TBs market.

“The interest rate on the ZWL$ savings bonds shall soon be reviewed to take account of developments on the domestic Treasury Bill market and to motivate banks to provide meaningful return on local currency deposits,” added.

In respect of Treasury Bills (TBs) issuances this year, the apex bank has carried out two TBs auctions, the first one to the tune of $30 million, and the second one to the tune of $60 million.

The bills on the second auction had an “open tender on yield basis” interest rate, and special features which included prescribed and liquid asset status, tax exemption and acceptability as collateral for overnight accommodation at the RBZ.

The results show that the highest rate offered was 50 percent, lowest 12 percent while the average was 14,365 percent.

Both were oversubscribed.

Earlier in February, Dr Mangudya told this publication that the ZWL$ savings bond had attracted over $2 billion from the market, accounting for around 20 percent of all the Real Time Gross Settlement (RTGS) balances in the system at the time.