Investors remain attracted to bonds

BoT HQ in Dar
The amount tendered in a 7-year bond floated by the Bank of Tanzania (BoT) last week more than doubled to 71.01bn/- compared to only 30bn/- sought to be raised, a sign of the improvement of liquidity situation in the market.

The BoT auction results show that despite the oversubscription the government accepted 30bn/- that had been sought to be raised.   

In the preceding auction deal, the government accepted more funds and concentrated on bond issuance to finance its development expenditures.

For example, the last week debt market where the BoT wanted to raise 100bn/- through Treasury Bill was oversubscribed to  269.99bn/- against 100bn/- the central bank wanted to raise, but accepted 114bn/- only.

In the 7-year tender, only 16 bids out of 37 received emerged successful, an indication that some investors tendered below the price offered at the market by the Bank. The minimum successful 79.18 while the highest and lowest prices per bid were 82.85 and 70.73 respectively.

Although interest rate was 14.85 per cent lower than the rates offered in the previous seven-year issue that closed at 15.44 per cent with highest yield accepted at 16.50 per cent, it did not prevent investors from injecting massive funds.

"The recent bond issue saw a high turnout in which BoT accepted all bids with marginal impact on yields," the bank said. 

The National Microfinance Bank (NMB) said money in the circulation has improved recently as manifested by the fall of interbank rates descending to below 3 per cent that could have been the reason for the oversubscription.

The Orbit Securities Head of Operations and Dealings, Mr Juventus Simon, earlier said bidders were likely to go for bills as it pays better compared to equities.   "This demand might drive bills yield rates to decline," Mr Simon said.

International Monetary Fund (IMF) said yesterday that the country's debt sustainability assessment (DSA) has been updated to reflect new borrowing activities.
Source: The Daily News, http://www.dailynews.co.tz, reported by Sebastian Mrindoko
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