Reverse repo over-subscribed

The Bank of Tanzania (BoT) move to accept collaterals with maturity of up to 364 days has paid-off as the last Wednesday auction reversed repurchasing agreement (repo) was oversubscribed heavily.

The move, introduced last week, witnessed traders offering 117bn/- at weighted average rate of 23.25 per cent. The central bank wanted to sell only 30bn/- and it end up honouring the same amount.

BoT's Director for Financial Market Judith Ndissi told the 'Daily News' on Sunday over the weekend that the move geared at broadening market participation by allowing Treasury Bills of 182 and 364 days as collaterals.

"Previously we accepted only short-term T-bills (35 and 91 days) as collaterals but we are now accepting all (182 and 364 days) as well, because all are easily turned into cash,"

she said.The repo is an instrument of money market and banks when they are in short of money are using the window to borrow from the central bank or other banks.

Standard Chartered Bank said the move to allow players to use collaterals with maturity up to 364 days would make it easier for almost every player to be capable of accessing the facility.

However, interbank liquidity remains very fragile with banks funding requirements still beyond the available interbank liquidity.

The liquidity situation, according to money market experts, continues to be tense with banks relying heavily on central bank window for funding.

To ease the situation, BoT started to act with 30bn/- offered to the market through the reverse repo.

The money markets have it that a reduction in the repo rate will help banks to get money at a cheaper rate. But when the repo rate increases borrowing from BoT becomes more expensive.
Source: The Daily News,www.dailynews.co.tz, reported by Abduel Elinaza
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