THE yield to maturity of a 25-year Treasury bond has gone up 21 basis points (bps) pushed by the government’s demand for fund increases.
The 25-year T-bond yields went up to 13.81115 per cent during the first auction in the new calendar compared to 13.598 per cent.
The auction, held on Wednesday, was oversubscribed by 73 per cent to 374.99bn/-.
Tanzania Securities Limited (TSL) said the increase was mainly due to the increase in the government’s demands for funds to finance the budget.
“As the government’s demand for funds increases, the yields will continue to rise,” TSL said yesterday in the brief report regarding the bond auction.
The brokerage firm said in a ‘Treasury Bond Yield Trend Analysis for 2021, 2022 and 2023’, recently that the high yields pushed down the prices of the government instrument, along with an increase in investors’ appetite.
“The increase in the budget is largely funded by domestic sources,” the report showed.
The 2023/24 budget stands at 44.4tri/-, which is a 6.9 per cent increase from the previous budget.
Alpha Capital Head of Research and Financial Analytics Imani Muhingo said yesterday that consistent with the central bank’s less accommodative policy, the weighted average coupon yield gained 21bps to 13.76 per cent.
“A steeper drop of the weighted average price compared to the minimum successful price indicates investors’ push for higher returns or rather market expectations of rising yields,” Mr Muhingo said.
Additionally, he said, the value of subscriptions went up by 12 per cent, aligned with the 20 per cent increase in the amount offered, while a 6.0 per cent drop in the value of successful bids indicates a slight pushback on the Bank of Tanzania’s side.
On the Wednesday auction, the central bank sought to raise 216bn/- from the public but ended up getting 374.99bn/- instead. The central bank took 259.23bn/- and left the rest on the table.
The weighted average price for successful bids was 91/26 thus pushing up both maturity and coupon yields to 13.81 per cent and 13.76 per cent respectively.
