THE five-year treasury bonds, the last auction for 2012 held last week, was undersubscribed by 40 per cent, despite an increase of yields to 14.9 per cent compared to the previous' 14.5 per cent.
According to Bank of Tanzania's (BoT) auction results, investors tendered only 21.8bn/- for the 35bn/- floated in the market.
"The central bank took 6bn/- out of the 21.8bn/- tendered from 33 bidders...this is the lowest amount taken since May last year of the two-year auction," stated the Standard Chartered Bank in its daily market commentary.
The festive seasons and end of month tax obligations for most investors in the long term maturities could have contributed to the under-subscription of the five-year treasury bonds. Over 60 per cent of the key players of long term maturities were commercial banks, with only five per cent as retail investors.
Others are pension funds, insurance companies and a few micro-finance institutions. "The five-year bond auctioned last week was undersubscribed by 40 per cent. The yield to maturity was 14.9 per cent slightly higher than the last five-year bond's auction held in September last year with 14.534 per cent rate of return," the Tanzania Securities Limited (TSL) weekly market commentary stated.
In the meantime, the BoT monthly economic review for November last year shows that the bond market offered two-year, five-year and 10-year bonds worth 43bn/- each. Total demand amounted to 75.6bn/-, 62.8bn/- and 62.6bn/-, respectively.
The bank accepted bids amounting to 43bn/- at face value from each auction as planned, making total sale of 129bn/- during October 2012. Meanwhile, weighted average yields of the Treasury bonds sold edged upwards compared to the rates recorded in their previous auctions. The 10-year bond yield recorded the highest increase of 0.21 percentage points to 15.28 per cent.