6 January 2014

Tanzania: T. Bills Undersubscribed As Liquidity Squeeze

LIQUIDITY pressure posed by Christmas and New Year festival haunted investors' participation in the one year treasury bills note despite hiked yields across all tenures, resulting to undersubscription.

The Bank of Tanzania (BoT) report of the auction conducted on the last day of the year 2013, shows that only 39 bids out of 75 received were successful.

"The New Year's Eve Treasury Bills Auction results were a pure reflection of the liquidity pressure facing the market due to the massive end of the year outflows," commented Mr Henry Lesika, the Bank M Tanzania Limited Vice- President and Head of Treasury.

He said with investor turn out at less than 35 per cent, it makes it the lowest since July 2013. The few investors' that showed interest demanded better returns for their money with bids reaching as high as 17.35 per cent.

The Central Bank did not consider expensiveness of the funds and with inflation in check at 6.20 per cent, it capped its cost at 16.26 per cent accepting only 12.67bn/- out of the 55.47bn/- tendered and 160bn/-originally demanded.

Overall, yields went up across all the three subscribed maturities, however, a larger weight on the 91 days caused by a bigger amount accepted in that bucket resulted to a fall of the consolidated weighted average yield of the auction from 15.51 per cent to 14.87 per cent.

The total amount tendered for the 364-day offer was 27.17bn/-, the under subscription against the 65bn/- initially sought at interest rates of 15.97 per cent, up from 15.65 per cent of the previous session.

The 182-day offer was subscribed to 13.7bn/- against the 55bn/- offered for tendering at a rate of return of 15.57 slightly up from 15.56 per cent of the previous market.

For the 91-day, a total of 14.6bn/- was tendered out of 35bn/- offered to the market at the rate of 13.75 per cent compared to 13.55 per cent of the last session.

Similarly, investors shunned away from bidding in the 35-day offer, for which the bank put forward 35bn/- to the market for tendering.


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