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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