Investors tender 1.23tri/-, record high for 25yrs bond

THIS week was dominated by the auction of the 25-year government bond, which I was looking forward to. And it did not disappoint. Yet before dissecting this, it is worth pausing to take stock of the equity market’s latest moves, which themselves paint a telling picture of our current environment.

The equity market registered a cooling in turnover, declining 17.32 per cent from 30.02bn/- to 24.82bn/-. Interestingly, volumes ticked higher by 1.57 per cent week-on-week, suggesting that while more shares changed hands, capital flows gravitated toward counters with lower absolute share prices.

Total market deals also contracted, from 6,345 deals the prior week to 4,770, underscoring the selective nature of participation. Top movers once again confirmed the entrenched liquidity concentration at the top of the market cap spectrum.

Tanga Cement (TCCL) was the week’s heavyweight, generating 13.3bn/- in turnover, 53.59 per cent of total market value traded, largely on the back of high-ticket institutional flows via the block trade pre-arranged market board.

CRDB followed with 9.49bn/-, then TBL (750.69m/- ), NMB (584.33m/-) and KCB (303m/-). Collectively, these five names captured 98.43 per cent of all equity turnover, leaving the remaining counters to compete for a very narrow liquidity pool. CRDB alone accounted for 2,301 deals out of the market’s total 4,770, marking a 48.2 per cent deal share, demonstrating its dominance in retail-driven order flow. On the gainers side, 10 counters posted gains.

Leading the charge was Maendeleo Bank (MBP), surging 28.57 per cent, followed by NICO (+27.44 per cent), SWIS (+22.35 per cent), CRDB (+17.70 per cent), MCB (+12.24 per cent), Vodacom (+5.45 per cent), MKCB (+5.19 per cent), JHL (+5.00 per cent), TPCC (+3.93 per cent) and NMB (+1.62 per cent).

Vodacom’s gain comes on the back of its FY2025/26 Q1 results presenting a turnaround from Q4’s loss of 5.02bn/- to a net profit of 8.51bn/- (+269.6 per cent QoQ). Growth was anchored in high-value segments like M-Pesa and data services, with the user base expanding past 23.5 million nationwide.

ALSO READ: Govt awards 9.8bn/- tenders to special groups

However, earnings also showed that operating profit fell 22.75 per cent QoQ, driven largely by rising depreciation and amortisation expenses. This signals that while the top-line and customer momentum are strong, cost efficiency will remain a focal point for sustaining margin expansion.

Only four counters posted price declines: Precision Air (PAL) (-13.46 per cent), TBL (-5.70 per cent), MUCOBA (-2.44 per cent) and DSE (-1.13 per cent).

In the case of TBL, the drop can be perceived as positive as liquidity for the counter increases, while PAL’s slide continues to reflect investor caution. Now, back to the 25-year government bond auction held on 6th August.

As we had discussed in the past, we are in the midst of a rate-downcycle, with the central bank successfully shifting investor psychology from initial resistance to alignment with its easing bias. I expected strong demand, but the scale of the response exceeded even my most bullish scenarios.

The central bank targeted an offer size of 264.31bn/-. Investors tendered 1.23tri/-, an oversubscription of nearly 4.65x. During my time of following these markets, such an absolute tender value for a single issuance stands out as unprecedented, to me. This occurred despite the central bank having materially cut the coupon from 15.75 per cent to 15.00 per cent. Yet perhaps the most telling datapoint was not the tender size, but the allotment discipline.

The central bank took exactly 264.31bn/- in successful bids, precisely matching the amount offered and resisted the temptation to absorb more liquidity, even at favourable pricing. This reinforces the message that the Bank of Tanzania (BoT) is not only steering yields, but also the pace of liquidity absorption in the market.

The weighted average yield to maturity came in at 14.4239 per cent, down 37.39 basis points from the prior 25-year auction on 4th June (14.7978 per cent). Of the 939 bids submitted, only 79 were successful, a reflection of both competitive bidding and the scarcity premium now attached to longduration paper. Beyond the primary market, short-term liquidity indicators reinforced the narrative of controlled easing.

The 7-day Interbank Cash Market (IBCM) rate dipped as low as 4.75 per cent twice during the week, a low not seen since December, 2023, suggesting that liquidity injections are achieving their intended effect. In macro terms, this auction underscores the central bank’s dual success: First, in anchoring investor expectations to a loweryield environment and second, in maintaining demand for longterm government securities even as returns compress.

This alignment between policy signaling and market behaviour is a key feature of sustained yield downcycles and historically, such periods tend to favour equity re-ratings, particularly in sectors with durable earnings streams and strong balance sheets.

As the trajectory holds, we will see further compression in yields in upcoming auctions, which, coupled with an equity market that is increasingly responsive to falling discount rates, could sustain upward pressure on valuations well into the next quarter. In this context, selective exposure to high-quality equities and strategic participation in primary bond issues would be wise.