Yields on long-term govt bonds slide

The Bank of Tanzania (BoT) auction results shows that 55bn/- offered to the market but the government accepted 64.8bn/- from the total of 78.9bn/- total amount tendered. Apart from the declining interest rates on bonds and bills, investors' appetite has remained higher, attracting massive investments.

The oversubscription which is 43.5 per cent is an indication that liquidity in the market has continued to be high in comparison to the available investment opportunities. According to analysts, the falling headline inflation, which in the month of January reached 10.9 per cent, was another major reason behind the massive investments on government papers.

In an interview during the week, the Metropol Corporation Ltd Managing Director Mr Sam Omukoko said central banks across the East African region should establish simple mechanism that will provide easy access for low income earners to invest in the papers.

He argued that lack proper flow of information on the benefits on the money market instruments contribute greatly to the underdevelopment of debt markets in the region. Instead he said majority of the people have been depositing their money to the commercial banks which offer an average of about 2 per cent yields but surprisingly lends at the rates above 20 per cent thus making the financial facilities dominant in the industry.

"Commercial banks engage in the supply of long term capital which impact negatively on the high cost of capital, production and ultimately high prices of the goods and services to the consumer," he said.

Mr Omukoko cited also huge volume of liquidity going unregistered in the informal economy which offers extensive potentials for the Capital markets to penetrate and harness them, only if proper mechanism is established. "Concerted efforts are needed for the Capital Markets to provide right information which shows the reasons why people should invest in the debt market instead of putting their money in the banks," he added.

THE shilling continues to fall as the demand ...

Author: DAILY NEWS Reporter

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