Two-year bond set for huge gains

The two-year Treasury bond auction set for tomorrow is expected to attract hefty investments far above the amount that the Bank of Tanzania (BoT) plans to raise, despite further dipping of the rate of returns.

According to a public notice ahead of the auction, the Bank will tender 30bn/- at 7.82 per cent coupon rate but with interest rates likely to edge downward. This has been contributed largely by  investors’ decisive role and the excessive liquidity at hand that mismatch investment opportunities.

Pension Funds and insurance firms which are among the key players in the long term instruments are expected to make a significant showcase in a bond with considerable market turnout. Likewise, a few micro-finance institutions are expected to participate in the show as well.

Commercial banks are more prominent in the short term maturities with over 60 per cent market share. This is due to the fact that major source investment resources are sourced from depositors’ money which are mostly of specific period of time. 

The two-year bond conducted in January, during the recovery period from major shakeup of government securities that saw them undersubscribed, managed to fetch interest rate of 17.85 per cent. 

But since demand outweighs supply in tomorrow’s auction, interest rates are likely to fall.  The central bank said recently that, “the oversubscription is a sign that investors are awash with cash thus competing on investment opportunities.” 

However, he said the central bank’s interventions to either ease or tight liquidity stance in the market is done cautiously without disturbing interest rates of the money instruments.

According to analysts, large investors have been channelling their funds into the share market to explore advantage of the awaited dividends this month and long term prospects of stocks at the Dar es Salaam Stock Exchange (DSE). 

A business analyst with the Tanzania Securities Limited (TSL) Mr Joe Nkya said it is common for investors to direct their resources to highly returning investment opportunities.
Source: The Daily News,www.dailynews.co.tz, reported by Sebastian Mrindoko

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