BoT HQ in DSM |
Treasury Bill yields are decreasing
since the beginning of the year, reflecting comparative liquidity in the
market and stiff competition on the demand for the government’s
short-term papers.
The bills opened the year at relative
good rates of 18.69 per cent, while the level of subscription was low.
The trend shows, with
exception of January, in February to April interest rates were high but
tenders amounts were low. From May to October it was a reverse trend, as
the yield rates were low but the subscriptions higher.
Analysts on money markets say the rates
dropped as bidders’ demand continued to raise the level of competition
which in return pushed down yields. The Zan Securities Chief Executive
Officer, Mr Raphael Masumbuko, said the low rates currently experienced
are a result of improved money supply in circulation.
“Bidders are
tendering at low rates to win the T-bills, in return driving down yield
rates altogether,” Mr Masumbuko told the ‘Daily News.’
The National Microfinance Bank (NMB)
said after the last week’s T-bill auction that the bidding was
oversubscribed by 103bn/- against 110bn/- that the Bank of Tanzania
(BoT) wanted to mop out of circulation.
“With the weighted average yield
down at 12.68 per cent from 13.07 per cent, reversing the recent yield
trend and reflecting a comparatively liquid market,” NMB said in a daily
market report, e-market.
The economy experienced tight liquidity
squeeze in the last 12 months after the central bank announced measures
to reverse galloping inflation that reached almost 20 per cent.
The
T-bills low rate is good for the economy, signifying the arrest of high
inflation rates and easing money supply in circulation. Barclays Bank
Tanzania said “interest rates came off across all tenors with highest
decline of 61 basis points (to 11.98 from 12.59 per cent) for 91-day
bucket.”
While the T-bill rates are descending
from 18.69 per cent of January to 12.68 per cent of last bid in October,
the lending are heading north climbing from 14.84 per cent in January
to 15.65 of July this year. Tanzania Securities CEO Moremi Marwa said
portfolio investors normally turn to other investment opportunities when
the T-bills rates are low.
“When T-bills return becomes lower
investors are looking for other investment opportunities with better
returns, given the level of risks,” Mr Marwa said.
Mr Masumbuko seconded
Tanzania Securities CEO saying the last week T-bill oversubscription
while the yield rates plummeting describe improvement of money in
circulation. “Therefore investors would opt for safer investments and
may look for equity instruments,” Zan securities CEO said.
In 2011, the highest dividends paid back
at Dar es Salaam Stock Exchange, was TCC stock that at 19.1 per cent
when the dividends per share stands at 600/- while equity price was
3,140/-.
The lowest was CRDB stock that registered a yield of 5.2 per
cent at dividends of 9 per cent with a share price of 172/50.
“Returns per share might be higher if
factored in price increase per share,” Mr Masumbuko said, adding: “it
may also be lower compared to its price dropping.”
“However,” Mr Marwa
said, “the impact on equities might not be significant given the type of
investors.” This is based on the fact that the key T-bills investors
are commercial banks, controlling about 60 per cent of bills auction
participation.
According to the BoT regulations, commercial banks
licences and mandate do not allow them to invest in equities.
Source: The Daily News,http://www.dailynews.co.tz, reported by Abduel Elinaza in Dar es Salaam
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