18 November 2013

Tanzania: 15-Year Bond Enters Market With a Bang

THE 15-year bond maiden action was received with big excitement, recording 140.3 per cent oversubscription. In the auction conducted by the Bank of Tanzania (BoT) on Wednesday last week, 36.08bn/- was total amount tendered in a bid that sought to collect 15bn/-.

Only 26 bids emerged successful out of 68 received while weighted average to maturity was 16.3 per cent. The government use debt instruments to borrow money from the public for both short and long term investment purposes particularly infrastructure financing.

The BoT Deputy Governor, Mr Juma Reli was quoted as saying the financial sector deepening and economic expansion has created the need for long-term debt instrument beyond ten years. "In order to address this demand the government found it important to issue a 15-year bond," Mr Reli said at the launch of the bond.

The bond issuance was pushed by the introduction of a long term financial market instruments such as mortgage financing products, syndicated loans and corporate bonds. The highest maturity paper that the central bank has been issuing was 10 year note, followed by seven-year, fiveyear and two-year treasury bonds. The new note marks a new investment opportunity for investors in long-term maturities.

Commenting on the auctioning of the long term maturity note, the BoT Director of Economic Research and Policy, Dr Joseph Masawe, said that it had been a dream of the bank for many years to sell the long term note exceeding 10 years.

"It is a significant milestone to have the 15-year bond in the market that offers opportunity for investors to invest and for the government to raise money for long infrastructure development," said Dr Masawe, citing Kenya that has for long been issuing the 30-year note, a necessary instrument for financing long term investments like infrastructure and industrial development.

He said the auctioning of the long term debt instrument was the beginning while studying the market behaviour before deciding to issue other long term bonds of 20 to 30 years. Pension funds, insurance companies and a few microfinance institutions are some of the investors in the long term government papers.

Copyright © 2013 Tanzania Daily News. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.