Investors' appetite on T-bonds grows

The 24-month Treasury Bonds auction conducted on Wednesday experienced a growing appetite by investors which analysts attribute the trend to the exemptions of  withholding tax of 10 per cent.

According to the Bank of Tanzania (BoT) market summary, the government offered 30bn/- for tendering but accepted only 20bn/- despite the huge demand.

"The amount accepted by the central bank intended to reduce the cost of borrowing by accepting 42 per cent of the total sum tendered of which the yields seem to be hiking compared to the previous auction,"  said Mr Godfrey Gabriel,  Orbit Securities Co Ltd Investment and Research Officer.

He added: "It was by surprise that the central bank decided to exempt withholding tax on this auction which is normally associated with 10 per cent levy."  The bank summary shows that only 10 bids out of 24 received sailed through, an indication that some investors quoted below price offered.

The bank offered 88.33/- average successful price and 87.21/- minimum value. Investors on the other hand, bid at 84.23/- and 91.89/- as lowest and highest bidding prices.

Commenting on the two-year Treasury Bonds auction summary,  Chief Executive Officer of Tanzania Securities Limited (TSL), Mr Moremi Marwa said that most commercial banks have shelved returns on deposits; the factor that has discouraged large investors.

Commercial banks have continued to be the giant investors in government securities, contributing above 60 per cent of the total market share. Pension Funds, insurance and a few micro-finance institutions  are among key investment players in the instruments.

As a result, remarked Mr Moremi, most institutional investors turned attention on government securities that could have contributed to the  oversubscription.   

Although returns on the two-year Treasury Bonds is below the annual headline inflation at 18.7 per cent as portrayed in the National Bureau of Statistics (NBS) for May this year, it did not discourage investors from injecting massive investments on the government paper.

The central bank has been applying tight liquidity measures to contain inflation rate that has affected investment level in the money markets. However,  the TSL boss said that  second half of the year yield rates on government papers is likely to increase above the 14.76 per cent of the previous deal  to attract massive investments for financing some economic activities.

Interest rates has been the major determinants that draw attention of investors on government securities to either overscribe or vice versa.
Source: The Daily News,, reported by Sebastian Mrindoko
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