Govt five-year bond oversubscribed

Business

Written by DAILY NEWS Reporter

THE long-term government paper has continued to be attractive to investors to record oversubscription, thanks to improved liquidity in circulation.

According to the weekly auction by the Bank of Tanzania (BoT), yield rates offered in the five-year debt security declined slightly but did not discourage investors to over subscribe the bond.

Weighted Average Yield to Maturity declined to 15.26 per cent compared to 15.99 per cent of the previous 5-year debt instrument auctioned on October last year.

Similarly, the weighted average coupon yield rose to 11.58 per cent compared to 11.90 per cent of the previous session. Yields and prices move in opposite directions.

The bond prices recorded slight increase giving way for the yields to drop. Long-term interest rates are set by the bond market. And if the economy continues to grow, interest rates should rise as well. A total of 62bn/- was offered to the market and in the end it was nearly doubled to 117.65bn/-.

However, the government retained only 62bn/- sought before to be mobilised. The 5-year debt security attracted a total of 54 bids but only 19 emerged successful.

The highest bid per 100 was 81.56 and the lowest 72.50. Similarly, the minimum successful price per 100 was 77.54 while Weighted Average Price for Successful Bids was 79.22. Over 60 per cent of the key players of long term maturities are commercial banks, with only five per cent as retail investors.