Seven-year government bonds undersubscribed

A seven-year treasury bonds auction conducted on Wednesday this week by the Bank of Tanzania (BoT) saw four out of five bids received emerging successful in a trade deal that was undersubscribed by 4.39bn/-.

The under subscription, according to the BoT tender results, shows that the investors’ end of month statutory obligations may have contributed to poor performance of the auction through which the government sought to raise 20bn/-.

“Active investors’ participation in the seven-year government paper deal this week was affected by the end of month salary and tax obligations,” stated the Tanzania Securities Limited (TSL) in Dar es Salaam on Thursday.

Similarly the yield rates set at 15.44 per cent which is far below the year-on-year inflation rate which for April dropped slightly to 18.7 per cent from 19 per cent of the previous month could have contributed to the under subscription.

According to the TSL Chief Executive Officer Mr Moremi Marwa, tight liquidity in circulation has to the great extent managed to stabilise the shilling but on the other hand devoured investors capacity to invest on long term government papers.

The government bonds continued to be predominant instruments in domestic debt portfolio, accounting for 73.3 percent followed by Treasury bills with commercial banks remaining leading investors followed by BoT and Pension funds.

Analysis of domestic debt holding by tenure show that commercial banks dominated in both long term and short term debts, accounting for 41.2 percent and 68.9 percent respectively. The supremacy of commercial banks in long term debt, in particular, is a reflection of narrow investor base.

Lending is one of the core business of almost all banks thus where returns are attractive, hefty investments is being injected.  

Other investors apart from commercial banks, the Pension Funds, insurance and few micro-finance institutions are among the key investment players in the instruments.

Source: The Daily News,http://dailynews.co.tz, reported by Sebastian Mrindoko

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