Oversubscription greets 2-year govt bonds

The two-year treasury bonds maturities, the first debt securities to be auctioned this year has been received on a high note by investors after recording overly subscription.

Despite the over subscription, the government accepted bids worth 68.06bn/-, higher than the amount offered to the market for bidding.

The situation implies that some bids were dropped out because of being expensive for the government to pay at maturity period. A total of 81 bids were received but only 26 emerged successful.

The auction summary released by the Bank of Tanzania (BoT) shows that 55bn/- was offered for bidding but it captured investors appetite and became oversubscribed to 116.81bn/-.

Yield rate for the 2-year bond expected to mature in 2017, increased to 15.25 per cent up from 14.83 per cent of the same debt instrument auctioned on October this year.

The highest bid was sold at 88.06, a bit lower than 90.04 of the previous sale while the lowest bid was 80.65 lower than 81.55 of the preceding trading.

The minimum successful price per each 100 was 86.91 while the weighted average price for successful bids was 87.59. The increased liquidity in the circulation in the first month of the year might be among the reasons that may lead to outstanding performance of the government securities.

The long term debt securities are important instruments used by the most governments to borrow from the public in order finance and invest into various infrastructure projects.

Key players in the long term maturities are the commercial banks, pension funds, insurance companies and some microfinance institutions.
Source: Daily News, reported from Dar es Salaam, Tanzania
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