Africa-Press – Tanzania. THE 25 years Treasury bond has been heavily oversubscribed by slightly over four times, which is a historic amount since government securities were introduced to the market almost two decades ago.
The oversubscription echoed debt analysts prediction issued before the auction on Wednesday, while increased liquidity in the market is seen as an advantage as it helps the government to borrow cheaply.
The 25-year bond attracted 585.58bn/- against the central bank offered amount of 133bn/- showing the huge market appetite for portfolio investment venues.
Zan Securities said in the report yesterday that the auction result, on successful amount, offers a glimpse of the monetary direction that the BoT is taking to want banks channeling funds to the economy.
“On what was the second auction of the 25-year Treasury bond since its initial introduction in the capital market in late April, the bar for long tenured instruments continues to rise,” Zan report said.
The bond minimum successful price rose remarkably to Tsh 100.1035 from Tsh 95 set in the previous auction thus pushing down yields to 15.86 per cent from 15.95 per cent on offer board.
The central bank, at the end of the day, accepted bids worth 123bn/- leave the rest at the table.
However, debt market analysts worried that the government bond issuance posed to crowd out much-needed credit for the private sector as banks typically prefer to hold lower-risk government bonds to maturity.
“[Last week] as such many central banks like the Bank of Tanzania implement policy measures to increase credit towards the private sector,” Zan said.
BoT, last week, issued policy measures to promote credit to private sector and lower interest rates, to kick start the capital reallocation excess liquidity tendered in auctions will be negated by means of increasing the minimum successful price as seen in the auction which rose by over 6/-.
“High appetite for long tenured instruments will continue to characterize all forthcoming 20 year and 25 year Treasury bond auctions to oversubscription,” Zan report said.
However, Zan cautioned, with the monetary policy measures in place by the BoT yields are going to fall by means of encouraging more liquidity towards the private sector.
An Economists-cum-investment banker, Dr Hildebrand Shayo, predicted when the 25-year bond was introduced that it poised to reduce credit to private sector as well.
“We need to be aware that most investors are now looking for long term investment with less risky and looking form long term bond is their avenue,” Dr Shayo said adding “this may crowd out private sector credit growth as well.”
Nevertheless, Dr Shayo said, on government side, 25-year implies longevity of liability with aim to raise long term funds to help push to completion long term project that at the end would have huge developmental impact.
