Interbank market sees better offers, rates drop

The interbank market has experienced increased offers that helped the  rates to climb down to around 25 per cent compared to 30 per cent of last week. 

The offers which were for overnight facility went up, thanks to liquidity improvement as the government paid salaries for April at a tune of 250bn/-.   

According to  Standard Chartered Bank Daily Market Report, demand for one month increased as money circulation has also improved. 

“There was  appetite for one month offers and this indicates improved liquidity as a result of spending by the government,” the bank said yesterday.  

The liquidity scarcity has been caused by the Bank of Tanzania’s tight money measures to curb foreign exchange volatility and double-digit inflation. The move has seen the shilling stability but on the other hand affected debt markets. 

On his part, Tanzania Securities Chief Executive Officer Moremi Marwa said on Tuesday that the liquidity squeeze has pushed up the cost of fund hence reducing banks profitability this year.  “Its impact is seen on government securities.

Despite the reduction of size, the Treasury Bills were  heavily undersubscribed,” Mr Marwa said.  The size for the two latest Treasury Bills were reduced to 70bn/- from 100bn/-. The successful bidders in the auction a fortnight ago offered  40bn/- only. 

The impact of the tight liquidity also saw a mere 5.0 per cent as successful bidders for the  ten-year 20bn/- bond  auctioned last week.  

Mr Marwa said commercial banks have failed to participate  at full length in the government securities markets as their liquidity position has  been wiped out by last year's measures to curb shilling fluctuations and high inflation.  

“The situation on the ground shows that banks have no enough funds,” he said.  On the other hand, the money squeeze has helped the shilling to stabilize. Since January, the shilling has been trading between 1,580/- and 1,600/- per US dollar.
Source: The Daily News, http://dailynews.co.tz, reported by Abduel Elinaza
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