Bank of Tanzania

Despite a further dipping of yield rates, the long term instruments continued to attract hefty investments far above the amount that the Bank of Tanzania (BoT) planned to raise.

The positive trend was witnessed in a seven-year bond auctioned by the bank on Wednesday that fetched 104bn/- against the 25bn/- on offer. Interest rate was set at 13.4 per cent compared to 17.05 per cent of the five-year Treasury bond auctioned in the previous market.

Analysts had predicted an over-subscription ahead of the auction. However, besides the over subscription, the bank accepted only 25bn/- that was sought.

Over 60 per cent of the key players of long term maturities are commercial banks, with only five per cent being retail investors. Others are pension funds, insurance companies and a few micro-finance institutions.

As it happened in the previous bond auction, the BoT has reduced the issue size to 25bn/- from 40bn/-. Since the beginning of the year the market has seen improved performances on trading of government securities compared to the previous period that saw deteriorating investors’ appetite.

The evidence of investors’ appetite building up is the oversubscription by 340bn/- of treasury bills auctioned last week against 100bn/- on offer despite lowered rate of returns at 14.6 per cent.

Analysts attribute the oversubscription to the easing of liquidity stance with overnight rates decreasing from record high in the months of December 2011 and early January this year. Overnight rates have come down, trading at low one per cent and high at 10 per cent levels.

As interests on the government securities dip downward, large investors are expected to channel their funds back into the stock market to explore advantage of the awaited dividends and long term prospects of stocks at the equity market.

By SEBASTIAN MRINDOKO, Tanzania Daily News

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