9 November 2012

Tanzania: Liquidity Keeps Treasury Bills Sparkling

SUFFICIENT liquidity in the market has continued to backup massive investments in government securities.

This led the Treasury bills auction conducted on Wednesday to be oversubscribed by 81.67 per cent despite the decline of interest rates. According to the Bank of Tanzania (BoT) auction results, the government had sought to mobilize 135bn/-, although it ended up taking 160.22bn/- out of 245.26bn/-, total amount tendered during the trading session.

"In the Treasury Bills auction, interest rates went down across all tenures, a sign of sufficient liquidity in the market," said the National Microfinance Bank Limited (NMB) in its e-market report. Barclays Bank Tanzania stated in its daily market commentary that, the auction was oversubscribed by 110bn/- while interest rates came off across the board, with the highest drop of 43 basis points posted in the 35-day paper.

"The yield curve declined across all tenors, where the largest drop came in the 35 days offer by 7.62 per cent and the smallest in the 91 days tender by 5 basis points to 11.93 per cent," remarked the Standard Chartered Bank in its daily market commentary. The central bank has applied tight liquidity instrument to contain inflation rate that has been biting the size of investment in the money markets.

The 364 days offer was oversubscribed by 74.15bn/-/- compared to only 45bn/- offered into the market at a yield rate of 13.18 compared to 14.4 per cent interest of the previous Treasury Bills auction. The government ended up raking in 87.77bn/- out of 119.15bn/- of the total amount tendered. In the 182-day tenor, 40bn/- was offered into the market for tendering at 12.86 per cent interest, down from 13.13 per cent of the previous trade.

However, the government ended up accepting 40bn/- although the total amount tendered jumped to 42.4bn/-. The 91-day offer was oversubscribed by 3.7bn/- at 11.93 per cent rate, down from 11.98 per cent yield of the previous market but the government accepted only 23bn/- below the amount sought to be generated of 40bn/-.

Similarly, the 35 days tenor was oversubscribed to 40bn/- at 7.62 per cent yield against only 10bn/- offered for tendering but the governments took the amount sought to be raised. Pension Funds and commercial banks remain giant investors in government securities, contributing above 60 per cent of the market share. Others are insurance and a few micro-finance institutions among the key investment players in the instruments.

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