Investors exhibit high appetite for treasury bills

Despite the end of month obligations, the twelve-month Treasury Bills auction that the Bank of Tanzania (BoT) conducted on Wednesday was oversubscribed by 63.6 per cent.

According to the auction results, the total amount tendered jumped to 237.34bn/- against 145bn/- sought by the central bank at an average interest rate of 14.18 per cent.

However, despite the oversubscription, the government ended up taking only 210.32bn/-. It is common that most investors fulfil end of month obligations including the disbursement of tax, salary and other statutory payments, cutting down the share of investments in the government papers.

But the situation was contrary and the auction was oversubscribed, a sign of excessive liquidity in the market. The bank report states further that there was a higher appetite for 364-day bills but there was no appetite for 35 day.

The total amount tendered for the 364-day offer was 92.35bn/- compared to 55bn/- initially drafted to be mobilised at interest rates of 14.9 per cent. The 182 day offer was subscribed to 76.06bn/- against the 45bn/- offered for tendering at a rate of return of 14.56 per cent.

Likewise, total amount tendered for the 91 day offer was 68.92bn/- against 40bn/- placed for tendering at 12.6 per cent rate of return. There was no appetite for the 35 days offer. 

Rate of return has been one of the major determinants in drawing attention of investors’ appetite on the treasury bills auction although in some past tenders, little changes were noticed despite hiked interest rates leading to under subscription.

Commercial banks have remained to be the giant investors in government securities, contributing over 60 per cent of the total market share. Pension Funds, insurance and few micro-finance institutions firms are among the key investment players in the instruments.
Source: Daily News, reported from Dar es Salaam, Tanzania
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