Tanzanai's demand for long-term bonds seen falling

Tight liquidity among investors has continued to impact negatively on the performance of the long term debt securities resulting into undersubscription.

Weak performance was witnessed in the seven-year treasury bonds auction by the Bank of Tanzania (BoT) on Wednesday after attracting few bids. 

Some of the leading investors in the government paper include pension funds, insurance firms and few microfinance institutions.

The BoT said that most investors including commercial banks and corporate clients are fulfilling annual tax obligation for the financial year 2014/15.

The fact that commercial banks and their corporate clients are obliged to fulfill annual tax obligations could reduce the ability to effective participation in the treasury bonds.

The government through the BoT sold the third seven-year bond this year which, contrary to the previous two sessions, this one ended up under subscribed.

The BoT received 33.68bn/- offers from local and foreign investors but in the end took only 5bn/- as successful amount. 

It would be paying those who participated in the bids, an interest or weighted average yield to maturity of 16.64 per cent compared to 15.6 per cent offered in the seven years bond auctioned in April this year.

Also the Bank would pay investors the weighted average coupon yield of 13.72 per cent compared to 13.1 per cent, offered in the preceding 7-year bond auctioned on April this year. Proceeds from the bond, would be used to finance infrastructure projects and settle some maturing debts.

The minimum successful price/100 declined to 72.28 compared 70.70 of the preceding seven years debt instrument. Similarly, the weighted average price for successful bids increased slightly to 73.45 compared to 76.94 of the other session.

Also the highest bid/100 for the long term government paper jumped to 76.63 compared to 90.17 of the session that expired in April this year. A total of 40 bids were received but only seven became successful.

Source: Daily News, reported from Dar es Salaam, Tanzania

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