The discovery of increased reserves of crude oil in Namibia has sparked interest in Namibian assets, with an index fund tracking local government bonds poised for its biggest annual jump on record.

The Exchange Traded Fund tracking local government bonds is listed on the Namibian Stock Exchange and in South Africa (STXNAMJ.J), opens new tab and has jumped over 20% in U.S. dollar terms since Portugal-based Galp's (GALP.LS), opens new tab discovery in April that the Mopane field could hold, opens new tab at least 10 billion barrels of oil.

Since then there has been interest from at least 12 other oil majors.

The fund is on track for its biggest annual gain - nearly 12% in US dollar terms. Meanwhile, an ETF tracking the closely watched JPMorgan emerging markets bonds index (EMB.O), opens new tab has gained 3.6% year-to-date.

Yields on local sovereign bonds have dropped further following the discovery, with those on bonds maturing in 2037 declining around 150 bps since April, while those on papers maturing in 2050 down around 200 bps.

"Most of the bonds issued are held by Namibian pension funds, but we are seeing some foreign buying now. We have seen massive yield compression ... since the oil discoveries were first announced," said Rowland Brown, co-founder of Cirrus Capital based in Windhoek.

Brown added that Namibian government bonds were still paper- settled, leaving foreign investors looking to the ETF to increase exposure to the resource-rich country.

The southwest African nation has garnered attention from major international energy companies following several major discoveries in recent years along its coast, although the country has not yet produced any oil or gas.

TotalEnergies (TTEF.PA), opens new tab and Shell (SHEL.L), opens new tab say they expect production in 2029-2030.