7 December 2012

Tanzania: Money Market Sees Excess Liquidity

THE twelve-month Treasury bills auction on Wednesday was oversubscribed by about 51. 55 per cent, an indication of excess liquidity in circulation.

The Bank of Tanzania (BoT) auction results show that 135bn/- was the target but ended up raking in 278.64bn/-.

This means that the bank fetched 175.77bn/-, above the target. "During the T-Bills auction, interest rates on the 35 and 182 day papers dropped and went up for the 91 and 364 day papers," says the Barclays Bank market report.

The weighted average yield increased by 12 basis points to 12.39 per cent from the previous auction. As the Central Bank seeks to remove excess liquidity from the market, it is expected that the trend of allotting more bills than what was originally auctioned will continue.

Similarly, the Standard Chartered Bank daily market commentary states that with liquidity suddenly improving, the yield curve declined across all tenors apart from 91 day offer, with the largest decline in the 35 offer by 24 basis points to 7.01 per cent and the smallest in the 364 tenor, about 4 basis points to 13.47 per cent.

The central bank offered 45bn/- for 364 days offer but was oversubscribed to 84.69bn/- but the government ended up taking 70bn/-. A total of 40bn/- was offered for tendering in the 182 tenors 36.68bn/- at an interest rate of 12.78 per cent 2 with the government taking 51.77bn/-.

In the 91 days offer, 40bn/- was placed for tendering at 11.87 per cent and was oversubscribed by 18.26bn/- with the Bank accepting 40bn/-. The 35 days tenor was also oversubscribed by 4bn/- against 10bn/- that was on offer for tendering with the government accepting the whole amount.

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

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