The 20 years Treasury bond auctioned last week was undersubscribed for the first time five years after introduced.
The long tenure bond the darling of debt investors since 2018 due to recent short intervals between long term bond auctions and monetary measures to absorb excess liquidity.
The government, last Wednesday, sought to raise 178.5bn/- through the 20-year debt instrument but ended up getting bids worth 123.1bn/-.
The Bank of Tanzania retained bids valued 103.9bn/- from the long term instrument that was subscribed by 68.98 per cent.
Zan Securities Chief Executive Officer Raphael Masumbuko said yesterday that this is the first time the T-bond has been undersubscribed since it was introduced.
"Until this auction, the 20-year had never tendered amounts below the amount offered due to investors' high preference for long tenures and rising yields in this tenure," Mr Masumbuko said in the firm's Weekly Wrap-up.
Other reason might be all four auctions in the last two months have been for long-term tenures.
Additionally, due to low subscription level, the weighted average yield to maturity has gone up by 23.87 basis points relative to the previous auction held mid-February from 12.6119 per cent to 12.8506 per cent.
Also, Mr Masumbuko said the recent increased "stock market activity can also explain the low auction subscription as higher-risk investors' shift to equities".
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The average yields have been on an uptrend over the last four auctions gaining 82 basis points from the average yield in July last year.
Moreover, the price floor has reached 93/- from 100/- in the same period.
"This continues to reflect lessened monetary policy accommodation by the central bank to taper inflation," he said.
The Vertex Weekly Market Review shows that the 20-year Treasury bond results diverged from their last week's forecast as the bond was undersubscribed.
Orbit Securities' Market Synopsis said the amount that the government wanted to raise through a 20 years bond fell short of the target, resulting in an under subscription of the long term debt instrument by approximately 31 per cent.
Out of the 160 bids received, only 125 were successful, with a total value of 103.9bn/-. The minimum successful price was 93/-, and the weighted average price for successful bids was 94/64.
As a result, the yield increased by 24.06 basis points to 12.8506, indicating a downward pressure on bond prices as investors are demanding more compensation for providing capital to the government.
On a positive side, monetary policy is transmitted more smoothly across long-term tenures as the central bank absorbs excess liquidity to maintain inflation within the target.
