18 December 2012

Tanzania: Bonds Continue to Attract Investors

AS the year comes to an end, high level of liquidity has continued to haunt the market as witnessed by the 2 year maturities bonds that became over subscribed by 111.66 per cent.

The auction results posted by the Bank of Tanzania (BoT) last week show that 55bn/- was offered to the market but the amount tendered jumped to 116.42bn/-, a sign of high liquidity in circulation.

As the BoT seeks to remove excess liquidity from the market, the continuation of the trend of allotting more bills than what was originally auctioned. Apart from the oversubscription, the successful amount fetched was 105bn/- an indication that some bidders tendered below the price offered in the market which could be expensive for the BoT during the bond's maturity, in the payback period.

The number of successful bids received was 55 out of 72 with the highest and lowest bids being 80.60 and 90.81 respectively. The weighted average yield to maturity was 14.26 per cent slightly lower than the rate offered in the previous auction of 14.53 per cent.

According to the NMB e-markets, "weighted average yield for a two year bond has fallen to 14.27 per cent from 14.53 per cent in an auction which was oversubscribed by 111.6 per cent a sign of a liquid market and a growing appetite on government papers."

"The BoT auctioned 55bn/- in a 2-year maturities bond at 7.82 per cent coupon. Yields slightly increased between 5-10 basis points as investors continue to lock higher yields in bonds," remarked the Standard Chartered Bank in its Daily Market Commentary.

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

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