DAR ES SALAAM: THE 20 years Treasury bond auctioned by the Bank of Tanzania (BoT) on Wednesday more than doubled, implying strong investors demand for the long-term debt instruments.
The BoT auction results show that the 20 years bond attracted bids worth 489.42bn/- compared to 183bn/- which the government sought to raise.
Despite the oversubscription, the government retained 431.85bn/- as successful amount.
The 15.14 per cent coupon rate was offered in the 20-year instrument held on Wednesday higher than 14.85 per cent of the edition held last month.
The weighted average yield to maturity declined slightly to 15.16 per cent slightly higher than 15.12 per cent of the previous session that took place in June.
Robust demand has been charactering the reissuance of bonds with tenures of 20 and 25 years testifying the confidence that retail investors place in these securities.
The government raises funds the debt instruments to finance the longterm projects which have huge contributions to the country’s economic development.
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Some of the long-term infrastructural projects for which the funds are channeled include the construction of roads, railways, bridges, ports, airports, hospitals and schools.
The implementation of the projects stimulates business growth, contribute to improved living standards and the government collects more revenue.
In 2022, the government opened the capital markets to investors from the East African Community (EAC) and the Southern African Development Community (SADC) as way to broaden investor base and foster sustainable economic development.
The Bank of Tanzania (BoT) Foreign Exchange Regulations, 2022 among others permit residents of the East African Community (EAC) and Southern African Development Community (SADC)…to invest in the treasury bills and treasury bonds.
The regulations also permit a person resident in Tanzania to invest in the prescribed territory.
Commenting on the government move, Mr Beatus Mlingi, Research and Analytics Manager at Vertex International Securities Limited said the implementation of these measures will make Tanzania regional hub for capital market activities, attracting a diverse range of investors and fostering sustainable economic growth.
“The increased participation from regional investors can also lead to greater diversification of the investor profile, reducing the reliance on domestic investors and mitigating market risks,” he said.
Furthermore, he said the government decision to bolster domestic capital market as a critical source of financing will play essential role in driving economic growth and development.
“The domestic capital market serves as a vital conduit for channeling savings into productive investments, thereby supporting infrastructure development, corporate expansion, and job creation,” he said.
The Finance Minister Dr Mwigulu Nchemba said when tabling the 2024/25 budget in Dodoma last month that in order to ensure that domestic capital market remains as a key source of financing, the government will continue issuing benchmark bonds to create competitive reference rates within the domestic capital market as well as broadening the market’s accessibility to regional investors from EAC and SADC.
