Banks' overnight rates go up

The overnight rates reached a six-week high last Thursday signalling liquidity drainage in the market. 

On the average rates reached 14.80 per cent after climbing rapidly since last month when trading between 5.00 per cent and 10.00 per cent.

According to Bank of Tanzania (BoT) data, since the beginning of this month the rates started to climb rapidly to trade at 8.89 per cent before advancing to 14.80 of last Thursday.

The overnight rate is crucial component to determine market interest rates as are generally the rate that banks use to borrow and lend from one another on the overnight market.

Standard Chartered Bank attributed the increase of the overnight rates to liquidity tightening especially with few small banks which has seen a gradual increase in the rates.

"We expect the same trend to continue to next week when some maturities are expected back into the interbank system," the bank said on its daily market report over the weekend.

The rates, according to the Standard Chartered, may also be pushed up by the presence of National Microfinance Bank (NMB), the largest local currency provider, at the market looking for shillings.

"NMB was seen in the market looking for shillings which may be the cause behind the sudden shift in overnight and interbank liquidity," the bank said in the report.

NMB treasury report said the "overnight rates trended slightly upward in the Thursday's session - signalling continued dry markets."

The central bank data show that despite the high overnight rates the amount traded also increases overtime in the last Thursday, the highest being 18 per cent while volume reported at 10.6bn/-.

Meanwhile, the shilling continues to trade flat against the US dollar as the market in and outflows have been well balanced since the beginning of this month.

"(The) shilling was steady against the dollar throughout today's trading session on the back of a moderate demand for the greenback from importers as investors settle their Treasury bond obligations," NMB said on its e-market report.

The market closed at 1593/1598 on Wednesday and Thursday.
Source: The Daily News,, reported by Abduel Elinaza
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