27 November 2012

Tanzania: Investors Scramble for Govt Securities

ADEQUATE liquidity has continued to boost investment in government securities despite unchanged yields across all tenors.

The auction results posted by the Bank of Tanzania (BoT) over the weekend show that the government had sought to mobilize 135 billion but ended taking 168.43bn/- and the papers were oversubscribed to 199.24 billion.

"The T-Bills auction on Wednesday saw insignificant interest rate change across all tenors as six months rate remain unchanged, 35 and 91 days bills dropped by 37 and 17 basis points respectively while one year bill increased by 25 basis points," the Barclays Bank said in its market report. The average yield to maturity for the treasury bills auctioned on Wednesday was 12.27 per cent compared to 12.57 per cent of the previous tender held earlier this month.

Comparatively, treasury bills auction conducted in the same period last year fetched premium weighted average yield to maturity 15.22 per cent because the Central Bank had applied tight liquidity measures to contain top flying inflation that saw liquidity level in the market dipping.

The BoT uses tight liquidity stance as one of the instruments applied to contain inflation that has risen to the point of biting the size of investment in the money markets as well as holding back the country's economic performance. The 364 days offer was oversubscribed by 42.68bn/- compared to only 45bn/- offered into the market for tendering, at a yield rate of 13.43 per cent, a bit higher than returns of 13.18 per cent of the previous t-bills auction.

The government ended up taking 71.29bn/- out of 87.68bn/-, total amount tendered. In 182-day tenor, 40bn/- was offered to the market for tendering at 12.86 per cent interest, same as the rates in the previous trading, but government ended up by accepting 53.73bn/- although total amount tendered jumped to 66.16bn/-.

However, the trade saw the 91-day offer being undersubscribed by 16.60bn/- at 11.76 per cent rate, down from 11.98 per cent yield of the previous market and the government accepted only 22.90bn/- out of 23.40bn/- total amount tendered although the government sought to generate 40bn/-.

But the 35 days tenor was overly subscribed to 22bn/- at 7.25 per cent yield against only 10bn/- offered for tendering and the government ended up taking 20.50bn/-. 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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