4 August 2014

Tanzania: Demand for Govt Securities Falls Slightly

YIELD rate hike in the 12-month treasury bills auction conducted recently failed to capture investors' appetite, ending up in under subscription.

The Bank of Tanzania (BoT) auction summary shows that the average yield rate was increased to 14 per cent compared to 13.66 per cent of the previous session, but was not enough to draw investors' attention on the short term government security.

A total of 135bn/- was offered to the market but managed to attract bids worth 98.11bn/- only and successful bids were only 52.67bn/-.

According to Tanzania Securities Limited (TSL) weekly market commentary low liquidity among commercial banks that are among the most active players in the money market, is one of the reasons for the under subscription.

The interest rates on the 364 days tenure increased to 14.72 per cent compared to 13.83 per cent of the preceding market and managed to hook investors to oversubscribe to 78.16bn/- against 55bn/- offered to the market.

Similarly, the rate of return for the 182 days offer rose to 14 per cent compared to 13.34 per cent of the previous session but failed to entice enough investments thus managing to garner only 11.2bn/- against 45bn/- put on offer.

The yield rate for the 91 days offer declined slightly to 12.39 per cent from 12.57 per cent of the past session, the situation that made investors to inject only 5.72bn/- against 32bn/- offered to the market.

The 7.35 per cent interest managed to attract bids worth 3.02bn/- against 3bn/- put on offer. Treasury bills and bonds are among the instruments that the government uses to regulate liquidity level in the circulation.

Over 60 per cent of the key players of long term maturities are commercial banks, with retail investors sharing only five per cent of the business. Other investors are pension funds, insurance companies and few micro-finance institutions.

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