Govt floats its first fifteen-year bond

By Prosper Makene

Bank of Tanzania

 In an effort to lengthen maturity profile of domestic debts, Tanzania (BOT), has for the first time floated 15-year treasury bonds with a 13.5 percent coupon.

Speaking when floating the bond yesterday, BOT Manager Domestic Market Department, Paul Maganga, said the move is also aimed at further development of the country’s financial markets.

He said the move would help to raise funds for long term development projects and provide much needed anchor or reference for other market instruments such as mortgage financing and corporate bonds.

According to Maganga, the issuance of the treasury bonds comes at an ideal time when Tanzania is heading towards a partially liberalized capital account that will allow for the participation of investors from the East African Community (EAC) member states in their government security markets.

“This will widen the scope of investors in our market, increase competition, thus lowering the cost of borrowing to the government and creating more opportunities in the secondary market,” he said, adding: “I wish to recognise the contribution and role played by our investors and stakeholders in developing our government securities market. The auctions have generally been oversubscribed and we have witnessed increased activity in the secondary market.”

He pointed out that challenges remain such as the market dominance by a few players where the majority buy and hold bonds to maturity and the lack of public awareness to the government security operation.

“It is my expectation that this will be an opportunity to invest in the newly introduced 15-year bond and create public awareness, thus supporting government efforts towards economic development,” he said.

SOURCE: THE GUARDIAN