TANZANIA: LONG-TERM BONDS CONTINUE TO ATTRACT INVESTORS

Bank of Tanzania (BoT)

Investors showed their appetite for long tenure instruments on Wednesday after they oversubscribed the 10-year Treasury bond by over 17bn/- on the back of improved money in circulation.

The Bank of Tanzania (BoT) put on offer 47.2bn/- at 16.43 per cent to be returned in ten-year mid last week but investors, mostly banks, replied by placing 49.58bn/- worth of bids.

The trend, for which the weighted average yield to maturity is heading north, was hooking investors’ appetite for the bond.

BoT data after the auction shows that the weighted average prices for successful bids was 75/84 out of every 100/- offered, thus accepting 47.2bn/- as successful amount to put around 15.08 per cent for both yield to maturity and coupon yield.

The continued overly subscription testify stability of the liquidity stance in the market.

The BoT interventions to either ease or tighten liquidity stance in the market is done cautiously without disturbing interest rates of the money instruments.

Similarly, the money market analysts describe the oversubscription as investors’ appetite for long term risk free instruments pushed by better yields.

The continuous descending of consumer price indexes – the prices of commodities-lifts further the investors’ confidence on the long term securities.

As the speed of change of prices of goods and services remains constant, it thus warrant further investment on the government paper which is also the sign of improving liquidity at the economy.

The trade of bonds at the secondary market-Dar es Salaam bourse also amplify biding of the government securities as investors have an exit window at their disposal.

With the option at the equity market, investors now see the possibility of selling their bonds at later date thus increasing appetite for buying government papers.

The auctions were oversubscribed and dominated by commercial banks. Pension Funds, insurance and few micro-finance institutions firms which are among the key players in the long term fixed instruments.