Africa-Press – Tanzania. The 20 years Treasury bond has been heavily over subscribed and the trend predicted to continue for the coming long tenure bonds at the expense of yield rates.
The bond, the first to be auction in this fiscal year, was oversubscribed by three time to 416.2bn/- against the offered amount of 139.5bn/-.
That strong demand pushed up the minimum successful price by 0.07 per cent from Tsh 99.9387 per cent to Tsh 100.0123 per cent. Zan Securities Chief Executive Officer Raphael Masumbuko said the demand on other hand pushed down weighted average yield to maturity slightly to 15.4088 per cent from previous 15.4144 per cent in the previous 20 years bond.
“When investors are more wary about the health of the economy and its outlook they are more interested in buying Treasury’s, thus pushing up the prices and causing the yields to decline,” Mr Masumbuko said through a Treasury Bond Auction Update report yesterday.
The CEO said the 20 year Treasury bond weighted average prices have been increasing sharply from Tsh 87.94 on its debut issuance to Tsh 100.4184 during this auction in the last three years.
“[This] attributed largely by increased participation by both retail and institutional investors, and overall perception of the economy,” Mr Masumbuko said.
The institutional investors such as commercial banks, pension funds, insurance companies and some microfinance institutions forecasted to dominate upcoming auctions, with high yield. The appetite is pushed by a stable exchange and inflation rates among the major factors that make the longer tenure Treasury bonds to be attractive to investors.
All 18 auctions of the 20- year Treasury bond have been oversubscribed meaning investors were tendering more than the offered amount by the central bank.
Vertex International Securities said Advisory and Capital Market, Manager, Ahmed Nganya, said the bond was oversubscribed by huge margins as they expected due to investors’ increased appetite for long term bonds.
“We expect strong demand for this bond in the secondary market in the coming weeks,” Mr Nganya said. Ironically, Mr Nganya said, the weighted average price decreased slightly indicated that most bids were closer to the lowest than highest bids.
