Tanzania: Appetite for treasury bills drops

DECLINING interest rates has been cited as one of major factors that swept away investors' appetites on treasury bills leading to under-subscription.

The government offered 100bn/- against 65.5bn/- total amount tendered a sign that most investors were discouraged by a downfall trend of interest rates, the Bank of Tanzania (BoT) auction summary held last week indicates.

"Returns are almost negligible for an investor. Declining of resources invested in treasury bills is a clear signal that less is being invested," said Mr Moremi Marwa, the Tanzania Securities Limited (TSI) Chief Executive Officer in an interview with the 'Daily News.'

There is a sharp decline of demand for government securities (treasury bills) against the amount supplied being second time in this year. The same situation was noticed early this year.

According to Mr Marwa, most investors were last month paying tax for the second quarte, thus trimming down the amount set aside for investment in the government securities.

The government offered 15bn/- at 3.1 per cent interest rates for 35 days, but the total amount tendered was only 5.8bn/-. For 91 days, the offer was 25bn/- at 3.9 per cent interest rate but only 5.1bn/- was tendered.

For 182 days, 30bn/- was offered at 5.4 per cent interest rate but only 24.1bn/- was tendered. A total of 30bn/- was offered for 365 days and total amount tendered was 30.5bn/-.

Also the depreciating shilling against the foreign currencies particularly the US dollar was being cited as one of the incentives attracting most investors compared to low returns on treasury bills.

Demand for US dollars was still rising and last week hit highest amount recorded almost three years back to above 1,600/-.

In its monthly economic review for May, the BoT maintained a moderate tender size of government securities for liquidity and government debt management.

According to the report, the amount sold in the treasury bills market was 194.3bn/-, at cost value with commercial banks dominating the market by purchasing almost 92 per cent.

During the month under review, treasury bills worth 175.2bn/-matured, out of which 92.5bn/- were liquidity papers and 82.6bn/- were financing papers.

It is estimated that over 60 per cent of the investors in Treasury Bills are commercial banks, while retail investors account for below 5 per cent. Other investors are pension funds, insurance funds and few micro-finance institutions.