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When Risk Dies: Rwanda Bets Its Future On Junk Bonds
In the old days, maybe 6 or 7 years ago, there was a reason high-yield bonds had a high-yield... because they were 'risky'. Now, thanks to the transformative efforts of the world's central banks, there is no risk anymore and Rwanda has figured that out. As AllAfrica reports, Rwandan sovereign wealth fund money is being invested in high-yield instruments so that it can grow and be used to fund the country's development projects. "This way, the Fund will grow faster and will be used to support development projects sooner," says the fund's CEO. What could possibly go wrong?
The Agaciro Development Fund money is being invested in high-yield instruments so that it can grow and be used to fund the country's development projects, Vianney Kagabo, the Fund's chief executive officer, has said.
Kagabo said Rwf23.78 billion ($35 million) has so far been collected...
The initiative, which was launched in August 2012, is Rwanda's first sovereign fund based on voluntary donations by Rwandans, well-wishers and corporate companies.
It is aimed at making Rwanda self-reliant as far as funding development initiatives is concerned.
He noted that these investments earn the Fund an average interest of between 8 and 12 per cent annually, respectively.
Kagabo, however, said the money is still too little to be spent on developments in the near future.
"We will start using the money to finance development projects when the Fund has grown substantially ... right now it's still very small," he noted.
...
"This way, the Fund will grow faster and will be used to support development projects sooner," Kagabo.
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This is what happens when risk is suppressed... What could possibly go wrong?
We suspect Blackrock is jubilant to find another willing buyer of its illiquid HY debt portfolio (though the numbers are tiny)
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I'm guessing that Rwanda is the retail bag-holder of the sovereign buying community.
Everyone knows Rwanda is the smart money.
They're going to fix Rwanda with the interest payments on $35 million. I guess it doesn't need much fixing. Or else, this is a very sad story.
Most surprising part of the article: Rwanda has a sovereign wealth fund! Who knew?
Smart enough to whack the pinata with a stick, unfortunately they won't get the treat they were expecting.
I think whacking a hornets nest is a more fitting metaphor. I think they will end up in the same boat as the Japanese pension fund, and they ain't gonna like it.
Hotel Rwanda, chop chop.
"Give that warlord some ounces of Ukrain gold and he'll buy that garbage paper with some folks money"
I'm guessing the CEO of the HY Fund is about to see his comp increase even more than the fund yield, and that loot won't be staying in Rwanda.
Good for Greek debt.
in central bank land a 4% coupon is high yield
Too funny. "What could go wrong"? Oh, the usual things; default and bankruptcy.
At first this seems funny until you consider it's no crazier than the US and Japan continuing to issue funny-money bonds.
Does CNBC have its own real-life Ron Burgundy?
http://tinyurl.com/k9pqe7l
Exactly. Where's is the fun in making fun of crackpot African regimes when we've got the likes of Yellen, Kuroda and Draghi to keep us entertained with the craziest policies ever invented?
Everyone knows that this stuff can only go up when priced in the local currency.
Rwanda is all in? Awesome. That's the buy signal I was waiting for! Oh, wait..
This is why countries should not have sovereign wealth funds. They'll bet it something stupid like horse races, lose all of it, and get nothing in return. If there's a surplus, maybe you could spread some of that wealth around. Maybe lower some taxes, fund research projects like the internet (DARPA), help people pay for day care? Just spend it on something. Don't set a big pile of money on fire.
Or let the people keep it in the first place. Just spend it on something is precisely what they're doing...
Libya did the same with Billions with GS managing discretion no due diligence - they lost everything and still in lawsuit
country is gone along with Omar so is the money
My question is which one of the usual suspects is behind the scenes "advising" them to do this? What who makes a shit ton of money on it and my money is it isn't going to be the people of Rwanda
The South-Sea Bubble nearly word-for-word
http://en.wikipedia.org/wiki/South_Sea_Company
"The headquarters were in Threadneedle Street at the centre of the financial district in London, in which street today can be found the Bank of England. At the time of these events this also was a private company dealing in national debt, and the crash of its rival consolidated its position as banker to the British government.[2]"
Now you know where UK Banksters come from .
Gotta start somewhere and suffering is good for the bank business....
Looks like another job for the IMF.
Long Machetes
Rwanda has money?
I assume they are using a printing press on lease.
'If it goes up it will always go up during my lifetime." - Perspective of a fruit fly
He noted that these investments earn the Fund an average interest of between 8 and 12 per cent annually, respectively.
goldman sachs: for an additional fee, we'll hide the losses when they blow upRussia may ban circulation of US dollar
[ 05 November 2014 14:46 ]
"The State Duma has been submitted a relevant bill
Moscow. Farid Akbarov – APA. Russia may ban the circulation of the United States dollar. The State Duma has already been submitted a relevant bill banning and terminating the circulation of USD in Russia, APA’s Moscow correspondent reports. If the bill is approved, Russian citizens will have to close their dollar accounts in Russian banks within a year and exchange their dollars in cash to Russian ruble or other countries’ currencies."
http://en.apa.az/xeber_russia_may_ban_circulation_of_us_dollar_218603.html
Otherwise their accounts will be frozen and cash dollars levied by police, customs, tax, border, and migration services confiscated.
After the law enters into force, it will be impossible to obtain cash dollar in Russia. The ban or termination of the US dollar will not apply to the exchange operations carried out by Russian Central Bank, the Russian government, ministries of foreign affairs and defense, the Foreign Intelligence Service and the Federal Security Service.
pikers. it is irresponsible of them not to go 3X long on that chit.
Long machetes...
"Development projects"?? (Sounds familiar...hmmm...)
If they were potentially profitable in the first place, the private sector would be doing them. Get government out of the picture and none of this chasing of yield would be necessary...
This is going to set the war against stereotypes back a few decades
Now scraping the bottom of the barrel in their never-ending search for 'greater fools'.
Africa wins again.
Soon the only thing that will matter is how much gold ya got Rwanda?
All that paper, good and bad, will burn..lika witch.