Author: ABDUEL ELINAZA
AfricaPress-Tanzania: The 10 years government bond has joined the other two bonds and sold at par value at primary market thanks to increased investors’ appetite.
The par value sales, a third occurrence for three consecutive government bonds, auger well with the treasury bid to low the cost of borrowing and lowering commercial bank lending rates.
The trend, on the other hand, crowded out the investment fund supposed to be directed to local ventures. The 10-year bond auctioned mid-week, attracts a higher price of 101.1236 while the low bid was 80.000.
The weighted average price was 99.6981. The 10 years bond, joined 2 and 20 year bonds, that were sold above premium prices, a trend that seems to assist treasury to low the cost of borrowing.
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.
Tanzania Securities said in its Weekly Market Blast that they expected the 10-year to be oversubscribed due to the higher appetite for government securities.
“We have witnessed the decline in yields for the medium-term securities, the same will be applied to long-term instruments,” Tanzania Securities said.
Furthermore, Tanzania Securities said, “the securities yield curve will continue to remain normal, with downward movements in the weighted average yields”.
The government sought to raise 110.03bn/- but the market answered by tendering 262.67bn/-. The treasury ended up taking 130bn/-.
However, the good sign of the par value price now pushes domestic portfolio investors to look to other money and equity markets. “…I think it’s connected to the increased domestic investors’ dominance on the DSE [Dar es Salaam Stock Exchange],” Mr Muhingo said.
Tanzania Securities said in the coming week, the outlook stays afloat, as the market activities continue to increase.
“Investors participation is increasing especially local investors, this indicates that the market will remain cheerful and sound,” Tanzania Securities said in its weekly report.
For the week ending last Friday, local equity investors maintained dominance of the market, being the second week in a row.
Orbit report showed that “local investors dominated both sides of the market while accounting for the total share of divestments”.
Foreign investors accounted for 8.34 per cent of the total investments, mostly targeted at the CRDB Bank counter.
