Author: ABDUEL ELINAZA
AfricaPress-Tanzania: TREASURY bill yields rates have dropped to drastically low level in history, forcing investors to look at other options for liquidity management.
The last Wednesday auction results painted to a rather new picture as rates plummeted to less than deposit rates and fixed deposit receipts (FDRs) from commercial banks.
The mid-last week bill auction results showed that weighted average yields stood at 3.97 per cent and only 365 days were sold, but under subscribed by 23.7 per cent.
The low yields rates, according to some debt analysts, showing the central bank want investors to channel their funds to other investment areas since a need to mop out liquid in the market is not there due to low inflation rate.
Orbit Securities Head of Research and Analytics Imani Muhingo told the ‘Daily News’ that it seemed investors were rather pushing back on lower yields.
“The majority of investors in Treasury bills comprise financial institutions, worrying about liquidity management,” Mr Muhingo said at the weekend adding:
“Now yields are way less than FDRs and deposit rates from commercial banks.”
According to the Bank of Tanzania (BoT), a one-year overall deposit rate stood at 7.54 per cent for the year ending June.
During the auction, three tenors received zero bids while the only active tenor, the 364days were undersubscribed by 23.7 per cent.
The central bank wanted to raise 84.53bn/-, but the market instead offered 64.47bn/-. Successful bids were merely 18.97bn/-.
“Investors are looking at other options for liquidity management rather than T-bills,” the head of analytics said.
Tanzania Securities projected that the bill to be oversubscribed based on higher craving of government securities; the auction behaved the other way.
“We may see oversubscription of treasury bills due to the higher craving for government securities,” Tanzania Securities said in its Weekly Market Blass last week.
However, they predicted right that the market might witness a decline in yields for medium-term securities, the same would be applied to short-term instruments.
Furthermore, Tanzania Securities said, “the government securities yield curve will continue remaining normal, with downward movements in the weighted average yields.”
