Mixed sentiments greet 15-year bond auction

DAR ES SALAAM: THE government’s 15-year bond auction today is expected to draw mixed investor sentiments, signalling a policy shift toward aligning returns with market yields and prompting a reassessment of return expectations.

Zan Securities Advisory and Research Manager Mr Isaac Lubeja said the investor sentiment follows a coupon reduction from 14.5 per cent to 12.75 per cent.

“From a retail investor standpoint, demand may ease slightly as this segment remains highly sensitive to nominal coupon levels,” he said.

He said a lower fixed coupon can reduce perceived attractiveness despite potentially competitive yields in the secondary market.

Conversely, institutional investors including pension funds, insurance companies and banks will likely focus on the effective yield rather than the coupon, anchoring their bids on yield expectations and duration-based portfolio strategies.

Mr Lubeja said their pricing will also take into account macroeconomic indicators that influence the real return outlook.

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Recent Treasury bill auctions have recorded a slight uptick in yields, rising by nearly one percentage point over the past three auctions, suggesting that investors are already demanding higher returns amid shifting rate expectations.

This momentum could extend to the 15-year bond, leading to modestly higher yield bids and a possible slight undersubscription, especially as the market adjusts to the lower coupon benchmark.

Overall, this auction will serve as a key barometer for investor appetite heading into the final stretch of this year’s auction calendar.

The resulting yield levels will not only reflect how investors are digesting the lower coupon regime but also provide early signals on inflation-adjusted return expectations for long-term government securities.

Alpha Capital Head of Business Development and Customer Services, Geofrey Kamugisha said the government’s upcoming 15-year 12.75 per cent Treasury bond auction today is expected to draw strong bids under these conditions, as investors continue to anticipate a prolonged period of low yields driven by policy easing and abundant liquidity.

Looking forward, as yields continue their downward drift and liquidity remains abundant, equities and long-duration bonds are poised to remain in the preferred asset classes.

The resilience observed through the election period signals not only confidence in the market’s structure but also a broader maturation of local investors.