8 February 2013

Tanzania: Treasury Bonds End Up in Five Times Oversubscription

ATTRACTIVE yields offered in the two-year bond auction on Wednesday was greeted by investors' deep appetite, reflecting the sign of steady liquidity in the economy.

Results posted by the Bank of Tanzania (BoT) show that 35bn/- was offered, but it was oversubscribed to 160.82bn/-, which is five times more. The government, however, took the same amount offered for tendering. Yields increased slightly to 14.29 per cent compared to 14.26 per cent in December.

The rate has been one of the major determinants that drew attention of investors in government papers. The returns above the inflation rate of 12.1 per cent as of December, last year, has also been the factor behind outstanding performance of the bonds.

Continued over subscription on government securities in recent days portray healthy liquidity as more cash chase few investment opportunities. Ninenteen bids emerged successful out of 97 received, an indication that some bidders tendered below the price offered by the bank.

The highest bid price was 89.7/-, lowest 82.09/- while minimum successful price was 88.52/-. The Central Bank has been applying tight liquidity measures as a way of curbing inflation, although it has been used cautiously to ensure equilibrium in the market.

Pension Funds, insurance and few micro-finance institutions which are among the key players in the long-term instruments expected to make a significant showcase in a bond with considerable market turnout. But most of the commercial banks make part of the giant investors and dealers in the short-term maturities with over 60 per cent market share.

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