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Government securities yield down 31 basis points

GOVERNMENT securities weighted average yield to maturity are still on a declining trend, a move that is likely to be applied by central bank to boost banks’ lending to public.

Last week debt market analysts betted the continuation of government securities yield drop due to high investors' appetite.

And, the last auction Treasury bill yields dropped by 31 basis points (bps) to 5.82 per cent compared to 6.13 per cent reported during the previous auction conducted mid last month.

Orbit Securities said in a weekly market synopsis that average yield to maturity of Treasury securities was still on a declining trend from what looks like a deliberate move by the central bank.

[The central bank seems]“to boost commercial banks’ lending to the public, as well as limiting the cost of borrowing for the government,” Orbit, the leading stock brokerage firm, said on Monday.

The mid last week, Treasury bills auction was oversubscribed by 57.47 per cent. Bank of Tanzania offered 107bn/- but the public tendered 168.49bn/-.

The central bank accepted 90.5bn/-. As the norm, Orbit Securities said, the majority of bids fetched the 364days tenor, although the 182days tenor received a substantial tender relatively.

The 35days and 91days tenors were not bid upon. Zan Securities Chief Executive Officer Raphael Masumbuko said Treasury bill auction results echoed their last week sentiment about the rate movement.

“We think we have not reached the bottom yet and investors’ appetite for government securities will continue to drive rates down,” Mr Masumbuko said.

The analysts based their bet on the fact that the central bank seems to hold a grip tight as demonstrated by recently 10 years government paper.

"BoT will continue to have this freedom for a few quarters going forward due to investors' huge appetite for government papers," Mr Masumbuko said.

The recently 10 years paper yield to maturity declined by 600 basis points from 15.1573 per cent to 14.5153 per cent.

Despite decline in yield rate for the 10 years government instrument, the bond was oversubscribed 25.01bn/-. However, the government retained 121.99bn/- has successful amount.

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