Tanzania: Treasury Bills auction undersubscription up

MEAGRE investments have continued to haunt treasury bills (TBs) leading to under subscription, the Bank of Tanzania (BoT) shows in its auction summary.

According to the BoT auction summary for treasury bills held last week, only 48bn/- was tendered against 100bn/- offered at 7.7 per cent compared to 9.2 per cent set aside in the previous auction.

Experts say higher inflation rate and declining interest rates as major causes for the fall of investments in government securities for fear to incur losses.

The annual headline inflation for the year ended July, reached 13 per cent compared to 10.9 per cent in June, the highest rate in the last two and half years.


With exception of 365 days tender that was oversubscribed by 6.6bn/- against 30bn/- offer at 9.9 per cent, the rest of the tenders remained under subscribed.

The 182 days, only 8.4bn/- was total amount tendered against 30bn/- offered at 6.04
per cent. For 91 days, 3.2bn/-was tendered against 25bn/- offered while in 35 days, only 650m/- was total amount tendered against a sum of 15bn/- offered.

The Bank of Tanzania (BoT) monthly economic review for June revealed a continued dwindling of the money market interest rates from the levels registered in January 2011.

The trend reflected high level of liquidity among banks, as indicated in the oversubscription
of government securities auctions. After having increased from 2.7 per cent in May 2010 to 7.1 per cent in January 2011, overall Treasury bills weighted average yield declined gradually to 4.54 per cent in May 2011.

Overnight interbank and repo rates remained below 2.5 per cent for three months in a row from over 6 per cent recorded in January 2011. Notwithstanding the decline in money market
interest rates, the 12-months time deposit rate and one year lending rate remained passive.

Furthermore, commercial banks remained the dominant players accounting for 70 per cent of the total amount sold, followed by Pension funds 14.5 per cent and Insurance companies 15.5 per cent.

It is estimated that over 60 per cent of the investments on the long term maturities to be
commercial banks, with only 5 per cent of retail investors. Other are pension funds,
insurance funds and few micro-finance institutions.