AfricaPress-Tanzania: THE increase in appetite for the seven-year Treasury bonds set for auction today is subject to upward change in yield after investors losing interest when rates dropped to resistance level.
In the recent past, government securities, have been sold at premium that have affected yield rates, at end of day shunning away investors.
The low yields are advantageous to the government since it sources fund at affordable rates.
Thus debt analysts are predicting that even the sevenyear Treasury bond may fail to be oversubscribed due to low yields and high bid prices.
Tanzania Securities said in weekly market blast that they may see oversubscription of the seven-year Treasury bond, but subjected to the increase in weighted average yield.
“The yields in short-term and medium-term government instruments are expected to increase, with undersubscription expectation, if yields will continue to decline further,” Tanzania Securities said.
“Furthermore,” the brokerage firm said, “the government securities yield curve will continue to remain normal, with expectations in the yields on treasuries will improve after reaching a resistance level”.
Also another brokerage firm, Zan Securities, said the seven-year Treasury bond may fail to attract the required interest from investors affected by low yields and high bid prices.
“We think [today’s] auction for seven-year Treasury bond might not attract much interest from investors,” Zan said in its Weekly Market Wrap-ups.
The seven-year bond if sold at par value will join 2-year, 10, and 20-year bonds, which had been sold above premium prices at primary auction, a trend that seems to assist treasury to low the cost of borrowing.
Previous, Orbit Securities Head of Research and Analytics, Imani Muhingo, said increased investors’ appetite are continuously pushing bond prices to above the par value while assisting the government’s move to lower the cost of borrowing.
“On one hand”, Mr Muhingo said, “the occurrence lowers both, the cost of debt for the government and interest rates in the economy, which are both paramount”.
While on the other hand, “the over pouring of funds into Treasuries may crowd out investment into the private sector, although as Treasury yields drop, we may, and have seen a spill over into other financial instruments such as equities and units,” he said.
