- Published on Friday, 22 June 2012 05:25
- Written by SEBASTIAN MRINDOKO
- Hits: 824
HIGH demand for government papers has continued to attract massive investments with oneyear Treasury bills auction conducted on Wednesday this week being oversubscribed by 41.26bn/-, a sign of the easing tight liquidity measures.
According to the Bank of Tanzania (BoT) auction summary, despite the over subscription the government accepted only the targeted 70bn/-.
“The cause for high demand is attributed to attractive returns that seem to be stabilizing unlike the yield in equities which is fluctuating due to price changes and other market dynamics including lack of liquidity for some companies’ shares,” remarked Mr Godfrey Gabriel, the Investment & Research Officer for the Orbit Securities Co. Ltd.
The situation, he said, drove market players like Pension Funds, Commercial Banks and other high net worth investors to inject more funds into Treasury bills, a free risk investment. “These Investors would definitely wish to put funds in an investment with high liquidity so as to meet their short term obligations.
However, Pension Funds are more of long term investors,” he added. Commercial banks remain giant investors in government securities contributing above 60 per cent of the total market share. Pension Funds, insurance and a few micro-finance institutions are among key investment players in the instruments.
The Treasury bills auction saw renewed interest in the 35 day paper, with the rate jumping up to 8.09 per cent attracting 1bn/-, the sum that the Bank offered for tendering. The amount tendered for 91 days rose to 28.60bn/- against sum of 22bn/- offered at 13.31 per cent yield. The 182 days offer went up to 36.83bn/- against a total of 22bn/- offered for tendering at 13.45 per cent.
The total amount tendered for the 364 days TB offer jumped to 44.82bn/- against 25bn/- offered at 14.64 per cent interest. Furthermore, the oversubscription is a sign that investors are awash with cash partly due to an easing tight liquidity stance that saw previous tenders including bonds auction failing to breakeven the amount offered for tendering.
The BoT has been applying tight liquidity measures to contain inflation rate that has been affecting the amount of investments in the money markets. The annual headline inflation dipped slightly 18.2 per cent as portrayed in the National Bureau of Statistics (NBS) for May this year, but did not discourage investors from injecting massive investments on the government paper.