Appetite for long-term papers soars

Investors showed their appetite for long tenure instruments on Thursday after they oversubscribed the 10-years Treasury bond by over 17bn/- on the back of improved money in circulation.

The Bank of Tanzania (BoT) put on offer 25bn/- at 11.44 per cent to be returned in ten-year mid this week but investors, most banks, replied by placing 42bn/-worth of bids.

BoT data after the auction shows that the weighted average prices for successful bids was 78/20 out of every 100/- offered, thus accepting 40bn/- as successful amount—to put around 15 per cent for both yield to maturity and coupon yield.

The Zan Securities Chief Executive Officer, Mr Raphael Masumbuko (pictured), describing the oversubscription as investors’ appetite for long term risk free instruments pushed by better yields.

“Investors feel that the ten-year bond is paying more than other short and medium term instruments at the moment,” Mr Masumbuko told the `Daily News' yesterday.

The CEO said also the continuous descending of consumer price index—the prices of commodities—lift further the investors’ confidence on the long term securities.

“Inflation seems to go down to warrant further investment on the government paper,” Mr Masumbuko said, “of course its signs of improving liquidity at the economy.”

The trade of bonds at the secondary market—Dar es Salaam Stock Exchange—also amplify biding of the government securities as investors have an exist window at their disposal.

“Investors now see the possibility of selling their bonds at later date at the market (DSE), this increase appetite for buying government papers,” he said.

The 11.44 per cent, ten-year, Treasury bond is the first long tenure paper to be sold in this year and the auction indicating a good year ahead.
Source: Daily News, reported from Dar es Salaam, Tanzania
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