News Column

Strong Demand Greets 7-Year Govt Bond

May 20, 2014

Daily News Reporter

LONG-term government papers continued to shine in the debt market after the seven-year bond attracted hefty investment at an auction on Wednesday last week by the Bank of Tanzania (BoT).

The positive performance of the long term fixed security shown on the auction summary is attributed to the stable liquidity level in the economy.

The Tanzania Securities Limited (TSL) noted in its weekly market commentary that the seven-year Treasury bond auction results indicate a 49 per cent over subscription, showing continued investors' appetite on government papers.

The improvement in liquidity has caused a drop in interbank borrowing rates, but gives stance to project even higher subscription results in the coming Treasury bill auction tomorrow.

Similarly, the increased weighted average yield to maturity to 15.68 per cent compared to 15.55 per cent of the previous session, could be one of the major reasons that made the seven-year debt security to be attractive to investors.

The previous seven years government note auctioned in March, this year, was received with a high note and registered over subscriptions.

The government planned to raise 49bn/- but it received bids worth 73.14bn/-. However, in the end only the amount that the government sought to be borrowed from the public became successful. A total of 80 bids were received but only 56 became successful.

The long-term bond maturities are major instrument used by the government to borrow from the public, with an intention of investing in services like infrastructure development geared at improving living standard of its people.

Over 60 per cent of the key players in 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.

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Source: AllAfrica

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