Business

Limited slots haunt investors in financial markets

ALTHOUGH only six out of 19 bids received for a 10-year Treasury Bonds emerged successful on Thursday, the auction recorded a 28.6bn/ oversubscription, about three times the amount on offer.

Bank of Tanzania (BoT) auction summary shows that the government offered 15bn/- in the market for tendering at 14.09 per cent coupon rate and 15.16 per cent yield to maturity.

“The auction results indicate that investors have surplus fund for long term investment... however, the tender recorded a yield of 15.16 per cent, 0.17 per cent higher than the previous dealing,” said and Investment and Research Officer with Orbit Securities Co Ltd, Mr Godfrey Gabriel.

According to Barclays Bank e-Newsletter, as liquidity continues to ease, there are expectations for the interest rates to come off considerably towards the third quarter when government spending for the new financial year begins. Tight liquidity is one of the central bank’s significant measures of curbing inflation.

Oversubscription is a clear indication that investors are awash with cash disproportionate with the available investment opportunities and hiked interest rates could be one of the reason that hooked massive investments. In the same manner, the results of the 10 year Treasury bond auction deal were largely determined by the pricing differences where investors quoted below the value offered by the BoT.

According BoT report, the auction recorded weighted average price of 81.14 with a minimum price of 78.65 and maximum of 81.89. Over 60 per cent of the key players of long term maturities are commercial banks, with only five per cent as retail investors. Others are pension funds, insurance companies and a few micro-finance institutions.

Presenting the 2012/13 budget estimates, the Minister of Finance and Economic Affairs Dr William Mgimwa said the government will continue with its arrangement to borrow from domestic market to finance development projects and pay rollover of maturing Treasury Bills and Bonds.

In the period under review, the government intends to borrow 1.63tri/- from domestic market out of which 483.9bn/- equivalent to 1 percent of the Gross Domestic Product (GDP) is for financing development projects and 1.15tri/- for paying back on maturing papers. He said the level of borrowing has taken into consideration macroeconomic indicators to avoid crowding out of private sector.