Synthetic Bond (SB)

Synthetic Bond (SB) is defined as a structured product consisting of several instruments for bullet redemption. In other words, it’s a basket of securities (T-Bills and/or T-Bonds). Securities are selected from the standard points of the yield curve. The amount borrowed by the State is split between the securities that make up the basket in proportions defined for each security.  Thus, the amount sought by the State on each security is function of a coefficient expressed as a percentage of the total amount of the loan.

Characteristics of SB

• Each security of the basket is detachable and has its own characteristics (refer to T-Bills and T-Bonds product sheets).
• All SB securities require bullet redemption.

Who can benefit?

• Any natural or legal person residing in the Union
• Foreign non-residents through Primary Dealers or banks resident in the Union.

Issuance technique

• Synthetic Bonds are issued by auction at multiple price/rates (requested price/rate) depending on the nature of the securities in the basket.

Subscription terms

• The bid amount is multiple of ten-thousand (10,000) CFA FRANCS for T-Bonds or one million (1,000,000) CFA FRANCS for T-Bills making up the basket.
• Direct investors (Primary Dealers that can directly place bids) bid on their own account or that of their customers on the whole basket of securities. Their bids will be placed according to the distribution key defined by the terms and conditions of the operation. These terms and conditions are specified in the notice of invitation to tender or the issuance-Briefing Note.
• Indirect investors (individuals or companies unable to buy Securities directly) can go through Primary Dealers to buy securities on one or more instruments making up the basket.

Taxation

Tax applied to T-Bills and/or T-Bonds of the SB is that in force in the issuing State. In general, the T-Bills and T-Bonds that make up the SB are tax-exempt for buyers residents of the issuing State.

Benefits

• Synthetic Bonds offers investment opportunities in the short, medium and/or long term for all profiles of investors contrary to the classic single securities.
• Synthetic Bonds are instruments to diversify the investor’s portfolio.
• Investment in Synthetic Bonds contributes to the financing of State projects

Availability

• Each of the securities comprising the SB is available for purchase on the primary market and the secondary market through Primary Dealers and brokerage firms within WAMU.

Liquidity

• Each SB security is detachable and can be negotiated over-the-counter on the secondary market and / or be admitted (for eligible securities) as collateral for refinancing from the Central Bank.