24 February 2014

Tanzania: Investors Keen On Long-Term Bonds

APPETITE for long-term bonds remained high where the 15-year government securities auctioned last Wednesday attracted many bids ending up with over-subscription.

The Bank of Tanzania (BoT) said in its auction summary that the 15-year bond fetched bids worth 32.16bn/- against 29.5bn/- that the government sought to mobilise.

The continued high liquidity level in circulation still supports positive performance of government securities in the market. However, despite oversubscription, the government ended up taking only 22.9bn/- as the successful amount, which is a sign that some bidders tendered below the bidding price offered in the market.

Weighted average yield to maturity was hiked to 16.9 per cent, from 16.6 per cent of the previous session. A total of 43 bids were received but only 22 emerged successful.

According to BoT, auctioning of the 15-year bond was a significant milestone in the debt market that offers opportunity for investors to invest and for the government to raise money for long-term infrastructure development projects.

With the auctioning of the 15-year bond, Bank is taking it as a study to determine 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.

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