Investors raised 2.36tri/- to invest in treasury bonds and bills in the first quarter of this year as banks are shunning lending to borrowers and turn to risk-free government securities.
The government debt securities were oversubscribed in the first three months to signal growing investors' thirst as they set aside about 2.36tri/- compared to 833.7bn/- offered by the Bank of Tanzania (BoT).
The Bank of Tanzania (BoT) failed to quench their thirst as it accepted 1.48tri/- which is 177 per cent of the amount offered to the market. Banks and pension funds are the main investors for the government securities.
According to the National Microfinance Bank (NMB) market digest, investors' appetite rose significantly due to improved liquidity condition in the quarter under review compared to fourth quarter 2016 whereby bids worth 1.36tri/- were tendered and 962.6bn/- were successful.
The outstanding performance of the treasury bills and bonds is attributed to the commercial banks move to investing on risk free government securities after cutting lending due to high non performing loans.
The amount tendered in the primary market of treasury bonds auctions was 2 per cent more than the amount offered. The total amount offered in the quarter for all auctions stood at 802.5bn/- and 821.6bn/- was tendered and only 604.5bn/-was successful.
Demand for Treasury bonds in the first quarter this year increased but not as much as treasury bills indicating that investors preferred short term securities. Investors' appetite was high for yields in the lower tenor leading to high yield bids, making it favorable for the government to raise funds through short term papers.
The quarter under review saw a quarter on quarter increase in turnover in the secondary bond market of about 62.67 per cent compared to the fourth quarter last year.
A total of 229bn/- worth of treasury bonds changed hands in the first quarter rising from 141bn/-recorded in the fourth quarter last year and 113bn/- in the same quarter in 2016.
Contrary to the primary market, most of the institutional investors in the secondary market preferred long term tenors including seven, 10 and 15 years bonds to short term tenors. This is to match their long term maturing obligations such as pension benefits.