Tanzania: Long term maturity bonds sparkle

LONG term maturity bonds have continued to outperform against the amount projected to be raised by the government in the auction conducted mid last week.

According to the Bank of Tanzania (BoT) auction summary for five-year treasury bonds, the government offered only 20bn/- at 12.5 per cent payback interest rates but the total amount tendered hit 39.7bn/-.


While investors’ appetite for long term maturity bonds was mounting and attracting huge investments, treasury bills continued to dwindle.

High interest rates offered on treasury bonds might be one of the incentives that are drawing massive investments compared to an average of only 7.03 per cent on the treasury bills.

The result of the bonds auction was a clear indication that investors were awash with cash. The central bank’s summary report reveals that out of 42 bids received only 25 emerged successful with 20bn/- offer.

Records indicate that commercial banks remained dominant players in the market accounting for 92.8 per cent in the two-year bond while in the five-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 five per cent of retail investors. Others are pension funds, insurance funds and a few micro-finance institutions.

However, a sharp decline of investment on short term maturities bills was partly attributed to the government decision to maintain a moderate tender size of its securities for liquidity and debt management.

For example, the last bank’s auction summary report for treasury bills revealed that total amount tendered was only 53.3bn/-against government offer of 100bn/- with successful bids hitting 21.5bn/-.

Another possible disincentive to investors on short term maturity bills could be the soaring double digit inflation, worrying them to inject more money.