Tanzania: Short term Treasury Bills pick up

SHORT term maturity treasury bills have started to pick up as a result of a narrow gap between the total amount offered and the sum tendered, the Bank of Tanzania (BoT) Treasury Bills Auction Summary conducted yesterday has revealed.

According to the report, only 2.8bn/- was under subscribed with successful bids landing at 69.3bn/-compared to a whooping of 46.7bn/- recorded in the previous auction.

This was a lucid indication that investors’ appetite for short term Treasury bills has began to build up that could partially be explained by rising interest packages staged at 6.8 per cent though a bit lower than the 7.03 per cent offered in preceding auction.

However, the 91 and 364 days auction were overly subscribed by 5.8bn/- against 30bn/- and 6.4bn/- against 30bn/- offered respectively.

“This is partly contributed by growing interest rate set at 4.7 and 9.2 per cents correspondingly, comparatively to the last auction summary,” said Mr Moremi Marwa from the Tanzania Securities Limited (TSI) in an interview with the ‘Daily News’ in Dar es Salaam on Thursday.

He said the market performed poorly in the previous months because investors were paying quarterly corporate taxes and other duties and few investment options.

The report revealed further that, 35 and 182 days auction results pointed a continuing under performances below the total amount offered by 11.3bn/- and 3.8bn/- in that order.

This is good news for investors in treasury bills after months of poor market performances According to the Bank of Tanzania (BoT) monthly economic review for June, this year, the money market interest rates continued to dwindle in May, the month under review compared from the levels registered in January 2011.

The trend, the report stated, reflects high level of liquidity among banks, as indicated in the oversubscription of government securities’ auctions.

After having increased from 2.6 per cent in May, last year to 7.14 per cent in January 2011, overall Treasury bills weighted average yield declined gradually to 4.54 per cent in May 2011.

This was partly explained by central bank’s decision to maintain a moderate tender size of government securities for liquidity and government debt management.

In the BoT monthly economic report for June, this year, commercial banks remained the dominant players, purchasing 89.7 per cent of the total market turnover, followed by insurance companies by 9.7 per cent and other investors 0.5 per cent.

On the other side, bonds securities continued to outperform, attracting huge investments against the amount projected to be raised by the government as per auction conducted last week.

For example, in the five years treasury bonds, the government offered only 20bn/- at 12.5 per cent payback interest rates but the total amount tendered hit 39.7bn/-.