The 24-month Treasury Bonds auction conducted on Wednesday experienced
a growing appetite by investors which analysts attribute the trend to the exemptions
of withholding tax of 10 per cent.
According to the Bank of Tanzania (BoT) market summary, the government
offered 30bn/- for tendering but accepted only 20bn/- despite the huge demand.
"The amount accepted by the central bank intended to reduce the
cost of borrowing by accepting 42 per cent of the total sum tendered of which
the yields seem to be hiking compared to the previous auction," said Mr Godfrey Gabriel, Orbit Securities Co Ltd Investment and
Research Officer.
He added: "It was by surprise that the central bank decided to
exempt withholding tax on this auction which is normally associated with 10 per
cent levy." The bank summary shows
that only 10 bids out of 24 received sailed through, an indication that some
investors quoted below price offered.
The bank offered 88.33/- average successful price and 87.21/- minimum
value. Investors on the other hand, bid at 84.23/- and 91.89/- as lowest and
highest bidding prices.
Commenting on the two-year Treasury Bonds auction summary, Chief Executive Officer of Tanzania
Securities Limited (TSL), Mr Moremi Marwa said that most commercial banks have
shelved returns on deposits; the factor that has discouraged large investors.
Commercial banks have continued to be the giant investors in government
securities, contributing above 60 per cent of the total market share. Pension
Funds, insurance and a few micro-finance institutions are among key investment players in the
instruments.
As a result, remarked Mr Moremi, most institutional investors turned
attention on government securities that could have contributed to the oversubscription.
Although returns on the two-year Treasury
Bonds is below the annual headline inflation at 18.7 per cent as portrayed in
the National Bureau of Statistics (NBS) for May this year, it did not
discourage investors from injecting massive investments on the government
paper.
The central bank has been applying tight liquidity measures to contain
inflation rate that has affected investment level in the money markets.
However, the TSL boss said that second half of the year yield rates on
government papers is likely to increase above the 14.76 per cent of the
previous deal to attract massive
investments for financing some economic activities.
Interest rates has been the major determinants that draw attention of
investors on government securities to either overscribe or vice versa.
Source: The Daily News,http://www.dailynews.co.tz, reported by Sebastian Mrindoko
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