Tanzania: Ten-Years Bond Predicts Rate Increase in 2020

By Abduel Elinaza

The ten-year Treasury bond minimum successful price moved up by 126 basis points indicating the central bank leaves a room for rate increase this year.

The minimum price increase of 1.54 per cent at the auction yesterday was also described as the

central bank maintains bond investors as the country heads to General Election later this year.

Zan Securities said in Treasury Bond Rates in 2019 and Outlook for 2020 report that in retrospect, all factors were aligned with their last week sentiment as the subscription level was low at 33 per cent.

"We believe the BoT is leaving a room for rates increase in the next year and beyond to maintain investors as the country prepares for the next year's general elections," Zan said in the report yesterday.

Zan, one of the leading brokerage firms, projected that the yesterday 10 -year bond auction might offer a relief to investors following almost a yearlong decline in rates.

However, Zan said "today's (yesterday) results came as a surprise to us as the minimum successful price moved up by 126 basis points or 1.54 per cent.

"Surprisingly, the Bank of Tanzania opted for a highway leaving 31bn/- on the table".

The 2020 outlook report further said the yester-auction draw some positives from the current trend namely BoT leaving a room for rates increase in the next year and beyond as the country is preparing for 2020 General Elections.

During the auction the government wanted to borrow 122bn/- but the public tendered 81.247bn/- for the 10-year Treasury bond. The successful amount was 55.87bn/-.

The bond weighted average coupon yield is 13.634 per cent, BoT pegged at 11.44 per cent before the auction, while yield to maturity 14.52 per cent.

Orbit Securities said the Treasury bills auction before Christmas was the second consecutive T-bill auction to get undersubscribed since the beginning of the financial year 2019/20.

"Investors are out on holidays and funds directed at festive expenses," Orbit said in Weekly Financial Market Synopsis.