Investors tender 50pc extra for 7-year bond

DAILY NEWS Reporter

SEVEN years bond auction by the Bank of Tanzania (BoT) yesterday received high investors’ attention that resulted into an oversubscription by over 50 per cent.

The bank’s auction summary shows that the debt instrument attracted bids worth 151.5bn/- compared to 100bn/- sought to be raised. Despite the oversubscription, the government retained the amount offered to the market for bidding - 100bn/-.

The government uses the debt instrument for raising funds for long term projects investment like road and railway infrastructure development. Investors in the government securities particularly commercial banks have continued to dominate the show, thus denying the much needed credit to the private sector.

Other investors in the treasury bills auction are pension funds and some microfinance institutions. Growth of credit to private sector remained subdued, despite monetary policy easing as shown in the BoT monthly economic review for October.

The credit decreased by 266.5bn/- to a stock of 16.35tri/- from 16.62tri/-in September 2016. A pick up in risk premium following increase in non-performing loans, slower growth of private deposits and portfolio diversification in favour of low risk government securities observed in the recent months remained the main reasons behind the developments in credit growth.

The weighted average yield to maturity declined to 13.97 per cent compared to 14.98 per cent of the previous session held in October. Despite the fall in yield rate, investors’ appetite for the government note remained high.

The weighted average coupon yield declined slightly to 12.15 per cent compared to 12.73 per cent of the preceding session. Weighted average price for successful bids was 82.92 compared to 79.14 of the session held two months ago whereas the minimum successful price/100 was 79.18 compared to 77.18.

The lowest and highest bids /100 were 72.11 and 90.03 respectively. According to BoT monthly economic review for October, the 2 and 15 years bond auctioned in September for government fiscal operations fetched 84.0bn/- and 97.8bn/-, respectively.

Both auctions were highly oversubscribed, as bids worth 258. 9bn/- and 126.5bn/-, respectively, were received. Successful bids amounted to 84.0bn/- for 2-year bond and 95.5bn/- for 15 years bond. Weighted average yield to maturity for 2-year bond decreased to 11.76 per cent from 12.45 per cent in the preceding auction, while that of 15-year bond increased to 16.74 per cent from and 16.15 per cent.