DEMAND for long term maturity treasury bonds has picked up, resulting into overly subscription, according to central bank's auction conducted last week.

According to the auction summary, the total amount tendered jumped up to 26.2bn/- against 20bn/- offered by the government at 10.08 per cent interest rate.

But, financial experts point out that the economic turbulence striking some developed nations, soaring inflation and surging fuel prices as well as persistent power blackouts are some of the factors that may continue to upset investors' participation in the government securities.

Some western governments have been striving to regain the growth pace of their financial markets as well as containing the level of debts.

The Bank of Tanzania (BoT) Governor, Prof Benno Ndulu told the Daily News in a recent interview that investors' confidence on government securities in most affected countries was on the decline despite being risk free in nature.

"Issuance of bonds was one of the options used by most governments to raise investment funds, but the fumbling market performances have worried investors," he said.

Also the unrelenting power shortages continued to force some investors in the government securities like commercial banks to cut down investment package to fund the increased costs of running generators.

The soaring inflation rate at 13 per cent was said to deter investors to disburse hefty investments on government securities. According to BoT monthly economic review for June, money market interest rates continued to dwindle from the levels registered in January 2011.

Notwithstanding the decline in money market interest rates, the 12-month time deposit rate and one year lending rate remained passive. Despite the market situation, commercial banks remained the dominant players in the bond market, accounting for 70 percent of the total amount sold, followed by Pension funds' 15.5 percent and Insurance companies 14.5 percent.

It is estimated that over 60 per cent of the investments on the long term maturities to be commercial banks, with only five per cent of retail investors. Others are pension funds, insurance funds and few micro-finance institutions.