Analysts give mixed reactions on 20 year bond

DAR ES SALAAM: Investors in long term debt instrument will be in the market tomorrow looking for investment opportunities in the 20 year Treasury bond to be auctioned by the Bank of Tanzania (BoT).

Zan Securities Chief Executive Officer Raphael Masumbuko said in the Weekly Wrap-Ups however that the debt instrument is expected to be slightly undersubscribed as investors’ eye for the 25 year bond in December.

“We anticipate the auction to slightly undersubscribe as investors hold on for the 25 year scheduled for late December we expect average yields for the 20 year to remain at the 13 per cent levels,” Mr Masumbuko said.

The long tenure bond, which has been darling to debt investors since 2018, became undersubscribed for the first time in the auction held last April.

Zan Securities said further that in the secondary market, the focus remains on the longer end of the yield curve.

Specifically, we anticipate more trading activities centred on off-the-run 20-year treasury bonds. This is expected to push yields to approximately 14.1 per cent.

On his part, Vertex International Securities Chief Executive Officer Mateja Mgeta for the upcoming 20 year bond auction, investors’ appetite is high provided that only a few of them venture into the secondary market.

“We expect the paper to oversubscribe however, yields are most likely to increase following the current trend of primary market for Treasuries Securities,” he said.

“If you take a look on this fiscal year issuance calendar, you’ll be notice that the BoT has decreased the frequency of issuance for long tenure bonds, 20’s and 25’s to be specific.

We think this is good for price stability in the secondary market as it provides balance between the supply and demand,” he said.