15-year govt bond goes on sale next week

Tanzania will for the first time next week start issuing 15-year treasury bonds becoming the second country in East Africa to offer over ten-year securities, after Kenya.

The 15-year bond will be auctioned next Wednesday and is expected to be the benchmark for long-term loan pricing and open the door for longer tenure corporate bonds.

The Bank of Tanzania (BoT) Deputy Governor, Mr Juma Reli(pictured), said due the financial sector deepening and economic expansion the need for long-term government securities beyond ten years was “inevitable.”

“In order to address this demand the government found it imperative to issue a 15-year bond with a 13.5 per cent coupon rate,” Mr Reli said when launching the bond on behalf of the Governor.

The bond issuance was pushed by the introduction of a long term financial market instruments such as mortgage financing products, syndicated loans and corporate bonds.

“The introduction of the bond (is to continue) efforts to lengthen the maturity profile of a domestic debt, raise funds for long term development projects,” the Deputy Governor-Administration and Internal Controls said.

The Dar es Salaam Stock Exchange CEO, Mr Moremi Marwa, said the bond came at the right time as it will act as the benchmark for pricing long term loans, which the market lacked.

“This will be the motivation for corporate to issue long term bonds,” Mr Marwa said “by acting as an anchor for market long tenure market instruments.” 

But the capital market still face a number of challenges including low public awareness of government securities and the market is dominated by banks.

BoT data shows that banks are contributing about 60 per cent of total government securities bidding and the rest is shared by pension funds, insurance and individuals.

The BoT Domestic Markets Department Manager, Paul Maganga, said that the central bank takes the challenge and is working around the clock to raise public awareness.

“The public awareness campaign continues but we need the every support from the public, including media people,” Mr Maganga said.

Kenya is the only country in the EAC region that has long term Treasury bond of 30 years, while Uganda, Rwanda and Burundi have no government securities that exceeding ten-year.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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