Over-subscription awaits seven-year T-Bills this week

Bank of Tanzania (BoT) will this week, Wednesday, float a seven-year bond with expectations of continued positive response from investors that would result into over subscription.

“We expect over subscription and cut-off price at 16 per cent with most trading books targeting the seven-year to add on some risk,” stated the Standard Chartered Bank Daily Commentary yesterday in Dar es Salaam. 

Over 60 per cent of the key players of long term maturities are commercial banks, with only five per cent as retail investors. Others are pension funds, insurance companies and a few micro-finance institutions.

As it happened in the previous bond auction, the BoT has reduced the issue size to 25bn/- from 40bn/-. The five-year fixed Treasury bond auction two weeks ago for instance was oversubscribed by 54.14bn/- against 25bn/- sought to be raised by the Bank.

Despite the impressive trading results in the previous bond auctions, the central bank accepted only 25bn/- as successful amount at 17.05 per cent yield to maturity.

Since the beginning of the year the market has seen improved performances on trading of government securities compared to the previous period that saw deteriorating investors’ appetite.

The evidence of investors’ appetite building up is the 340bn/- chasing the 100bn/- treasury bills that were on offer at a lowered return rate of 14.6 per cent.

Analysts attribute the over-subscription to the easing of liquidity stance with overnight rates decreasing from record high in the months of December 2011 and early January this year. Overnight rates have come in lower trading at low one per cent and high at 10 per cent levels.

As interests on the government securities dip downward, large investors are expected to channel their funds back into the stock market to explore advantage of the awaited dividends and long term prospects of stocks at the equity market.
Source: The Daily News, reported by Sebastian Mrindoko
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