Government securities yield seen on decline

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. 

This is unparallel with the current trend where the rates are low at around 13 per cent, while bid amounts are higher. 

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,, reported by Abduel Elinaza in Dar es Salaam
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