INCREASED average yield in the seven-year bond auctioned on Tuesday failed to entice huge investments, ending up with under subscription of 0.16 per cent.
Similarly, Christmas holidays as well as fulfilment of year-end obligations by investors contributed to decreased investment in the long-term maturity government securities.
The auction results posted by the Bank of Tanzania (BoT) show that weighted average yield was up to 15.8 per cent compared to 15.1 per cent offered in the previous session.
The government planned to raise 25bn/- in the 7-year bond, but it ended up raising only 21.02bn/-, with bids for only 14.1bn/- succeeding, an indication that some investors bid below market price offered by the bank.
Despite improved liquidity in circulation, investors' participation in the sevenyear government paper deal was low, the fact that some analysts attribute to outstanding performance of the listed firms at the Dar es Salaam bourse.
Over 60 per cent of the key players in 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. Tight liquidity is among BoT's monetary policy instruments used to tame inflation.
Treasury bills and bonds are among the instruments that the government uses to borrow money from the public. The government will in 2013/14 financial year borrow 1.15tri/- to finance rollover of maturing treasury bills and short-term treasury bonds.
The move is of paramount importance because the government is facing the challenge of financing development projects through domestic revenue.