COLUMN: FINANCIAL MARKETS DIGEST. BoT cuts rates, signals stability

THE Tanzanian capital markets staged a sharp recovery during the week ending July 4th, 2025, with equity turnover rising dramatically by 94.49 per cent to 27.13bn/-, up from the previous week’s 13.95bn/- .

This increase came despite a decline in the total volume of shares traded, from 14.9 million to 12.7 million shares, highlighting increased participation from high-value trades. The number of active counters was 21, a sign of growing breadth and maturity in the market.

However, the data still reveals persistent concentration: 89.06 per cent of the week’s equity turnover came from just two stocks: TBL and CRDB Bank. Tanzania Breweries Limited (TBL) alone accounted for 48 per cent of all turnover with 13.02bn/- in trades, while CRDB followed closely, contributing 41.06 per cent with 11.14bn/-.

The remaining turnover was distributed across KCB (1.04bn/-), NICO (578.5m/- ), TCC (514.98m/-), NMB (511.07m/-), JHL (112.58m/- ), VODA (56.86m/-) and other minor contributors. Notably, the top five counters alone accounted for 96.94 per cent of total turnover, underlining the structural liquidity imbalance in the equities market. On the gainers’ side, Tanga Cement (TCCL) led the pack, posting an impressive 15.43 per cent increase in share price to 2,020/-.

MKCB followed with a 5.77 per cent gain, while KA (+5.56 per cent), DSE (+3.57 per cent), KCB (+2.17 per cent), TPCC (+2.11 per cent), Vodacom (+2.04 per cent), CRDB (+1.27 per cent), NMB (+1.21 per cent) and EABL (+0.80 per cent) rounded out the list.

On the losing end, PAL (-13.89 per cent), MCB (-4.00 per cent), JHL (-3.73 per cent), TBL (-1.96 per cent), Swissport (-1.96 per cent), Afriprise (-1.45 per cent) and NICO (-0.54 per cent) saw negative movements. The fixed income space was equally eventful, albeit absent a primary government auction.

The secondary bond market surged with total traded face value rising by 65.30 per cent to 279.12bn/-. Government bonds, particularly the 20-year papers with coupon rates of 15.25 per cent and 15.49 per cent, were most active, trading at average prices of 110.63 and 110.32, translating to average yields of 13.70 per cent and 13.87 per cent respectively.

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These elevated trading prices point to strong demand and shrinking yield premiums. Following closely were 25-year, 10-year and 15-year government bonds, including the 25-year paper carrying a coupon of 12.56 per cent. Corporate bonds also saw increased activity, particularly from NBC, CRDB’s Samia Bond and NMB’s corporate bond, signalling continued rising investor interest beyond sovereign debt.

Adding further context to these movements, the Bank of Tanzania released its government securities issuance calendar for the first half of FY2025/26. This schedule confirmed that the next auction for a long-term government paper will occur on August 6, 2025, roughly a month away.

This temporal gap in long-duration issuances could pressure yields lower in the near term. Supporting this thesis of further yield compression, the Treasury Bills auction held on July 2nd offered 75.57bn/- in 364-day paper but attracted bids totalling 163.45bn/-—an oversubscription of 87.88bn/-.

The Bank accepted 82bn/- in successful bids at a declining weighted average yield of 8.4152 per cent. This downward yield movement continues a trend in which government paper has consistently priced lower, a signal of strong demand amid tightening yield environments.

Reinforcing this monetary narrative, on July 3rd, the Monetary Policy Committee (MPC) issued a key statement following its July 2nd meeting. The Committee lowered the Central Bank Rate (CBR) by 25 basis points to 5.75 per cent from 6.00 per cent, citing improved inflation outlook and macroeconomic resilience.

The Bank of Tanzania pledged to maintain interbank rates within a slightly narrower corridor of 3.75 per cent–7.75 per cent, anchoring expectations for stable and lower policy rates going forward. According to the MPC, inflation has remained within its 3–5 per cent target band, supported by favorable harvests, stable exchange rates and disciplined fiscal policy.

The economy is reportedly strengthening on the back of robust public infrastructure investment and increased private sector activity. Risks to this outlook remain limited, especially given Tanzania’s diversified economic structure and the government’s commitment to growth-enhancing reforms.

From an investment perspective, this macro environment, characterised by yield compression, inflation stability and abundant liquidity, favours fixed income investors.

As rates decline, bond prices rise, benefitting those who entered early. The 25-year bonds currently trading at premium levels in the secondary market offer a clear example. With the CBR and Treasury yields trending lower, locking in longterm fixed income assets now will provide a tactical yield advantage in an environment where future returns will likely normalise downward.

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In conclusion, a declining rate environment is not a market devoid of opportunity, it is a landscape shifting in favour of duration-sensitive assets and long-term allocators. Institutional and retail investors would do well to recalibrate expectations and reposition portfolios while the window remains open.

As Tanzania’s markets mature, breadth and depth are emerging, signalling a transformative moment in the country’s capital markets development trajectory.