Tanzania: Long term bonds attract more investors

WHILE investors' appetite on treasury bills is declining, long term maturities continue to attract enormous investments.

According to the auction summary by the Bank of Tanzania (BoT) on the 10 years bond held last week, the government offered 20bn/- but was beaten by far to a total of 58bn/- oversubscription.


One of the incentives that draw large number of investors is the size of the yields offered at 12.6 per cent compared to an average of only 5.4 per cent on the treasury bills.

The results of the bonds auction were an indication that investors were awash with cash.

The 10.9 per cent double digit inflation rate announced by the National Bureau of Statistics (NBS) on Friday is mentioned as among the factors discouraging investors on the short term maturities that saw the last week auction being undersubscribed.

Commenting on the market situation of the short term maturities, Mr Moremi Marwa, the Tanzania Securities Limited (TSI) Chief Executive Officer, said: "Returns are almost negligible for an investor. Declining of resources invested in treasury bills is a clear signal that less is being invested."

There is a sharp decline of demand for short term securities (treasury bills) against the amount supplied being second time to happen in this year.

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

For example, in the Treasury bonds market, the Bank conducted two auctions one for 2-year bond with cost value of 39.8bn/- and another for 5-year with cost value of 37.8bn/-.

Banks remained dominant players in the market accounting for 92.8 per cent in the 2-year bond while in the 5-year Treasury bond; banks purchased about 86 per cent of the total amount auctioned.

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