Five-year bond subscriptions go 'overboard'

The five-year Treasury bond was over subscribed thrice today but the central bank accepted 25bn/-,the announced tender amount.

The Bank of Tanzania (BoT) wanted to rise 25bn/- instead bidders offered 79.2bn/- for the bond which its weighted yield rate to maturity is 17.05 per cent with coupon rate of 12.37 per cent.

Bankers had predicted the over subscription on the back of easing money circulation in the market—that have seen overnight rates dropping to the lowest level in six months since last August.  

“It remains to be seen as a positive sentiment,” Standard Chartered Bank said Tuesday in its Daily Market statement, “we expect over subscription and cut-off at 18 per cent.”

The banks prediction is based on the fact that most trading books will be targeting the bond to add on some risk.

Earlier, BoT, cut by over 50 per cent the size of the bond to 25bn/- from 40bn/-. BoT gave no reasons for reduction of the size. However, analysts said it was due to tight liquidity in the market.

The central bank canceled two auctions of five-year bonds late last year due to disagreement with bids offered from investors who wanted high yields to avert the inflation risks. The inflation, stands at 19.8 per cent as at end of December.
Sources: tzexchange.blogspot.com
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