Investors rush for 10-year Treasury bond

Prof. Ndulu
The 10 years treasury bond was received relatively well by the investors on Wednesday after it was oversubscribed by 145 per cent, signifying the market returns to normal after a four month of tight money stance.

The market return to equilibrium is key as interest rates were heading north thus reducing the bank appetite to lend private sector.   

The Bank of Tanzania (BoT) wanted to raise 20bn/- from a 10 year-bond that had a price  tag of 11.44 per cent as coupon rate, instead the market bided 49bn/-. BoT accepted only 20bn/-.

BoT Governor Prof Benno Ndulu said dropping government securities interest rates is a good sign that money market are heading back to normal.

 “The trend will enable banks to lend out,” Prof Ndulu said during the inauguration of the World Bank’s Tanzania Economic Updates report on Wednesday.

The money market interest rates climbed to almost over a decade high when t-bills reached 19 per cent and interbank lending jumped to 36 per cent, the historical high. 

The northward trend was experience in the last four months when the central bank introduced the tight liquidity measures to curb high inflation and shilling down spiral trend, last October.

“The restrictive monetary policy has already pushed interest rates up and reduced credit to the private sector,” The World Bank said in the report. 

Standard Chartered Bank said on its Daily market commentary yesterday “the bond auction was well received as market tendered 49.09bn/- against 20bn/- issues and were accepted”.

The bank also said interbank continues to trade within wide range with overnight rates increasing moderately to 7.73 per cent from the previous close of 5.39 per cent. 

The World Bank report shows that the authorities have succeeded in keeping core inflation –excluding food and energy—below 10 per cent.

 “This move (was) intended to reduce monetary expansion and control inflationary pressure,” the report indicates.
Source: The Daily News,, reported by Abduel Elinaza
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