Author: ABDUEL ELINAZA
AfricaPress-Tanzania: THE 20-year Treasury bond yield is expected to slightly decline at tomorrow’s auction, but oversubscription is imminent.
The yield, according to some debt analysts, will decline as the bond, in recent auctions, was sold at or above the premium price, following huge investors’ appetite.
Tanzania Securities said in a Weekly Market Blast on Monday that they projected the yield rate for long-term securities to slightly decline, but oversubscription loomed large.
“…[The] oversubscriptions are expected since this [20 years] instrument is most popular and highly demanded due to higher return in terms of coupon,” Tanzania Securities said.
Furthermore, the stock brokerage firm said the government securities yield curve “will continue remaining normal”.
Zan Securities Chief Executive Officer Raphael Masumbuko projected that the bond would attract interest from investors.
“We expect next week’s auction for 20–year Treasury bond to garner much interest from investors,” Mr Masumbuko said.
The downward yield trend followed significant auction oversubscription, meaning falling rates across all papers since the beginning of the year.
On a quarterly basis in three months to June, all bonds, with an exception of a 2-year auction that was cancelled, 10-year and 15-year and 20-year-yield rate fell between 0.20 per cent and over 1.50 per cent.
The government wants to raise 136bn/- at tomorrow’s 20-year bond auction which has a coupon rate of 15.49 per cent.
The coupon rate dropped by a 0.36 percentage point from 15.85 per cent offered in this April.
The 20-year T-Bond yield to maturity dropped to 15.63 per cent in July, down from 16.29 per cent in February.
Since the long-tenure was introduced in the market, the 20-year bond continued being the darling of debt investors.
In recent auctions despite sales per or above premium, the instrument continued being oversubscribed.
