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Maiden 20-year bond enters market with bang

BULLISH mood greeted the maiden 20-year Treasury bond introduced into the market for the first time by the Bank of Tanzania (BoT) on Wednesday ending up oversubscribed. 

Manager, Domestic Market at the BoT, Mr Revelian Felix told the ‘Daily News’ in Dar es Salaam yesterday that attractive rates was among the major factors for high investors’ appetite on the 20-year instrument. 

“Stable exchange and inflation rates are the other major factors that make the 20 years treasury bonds and other long term debt instrument very attractive investment for investors,” he said. 

The auction session attracted bids worth 61.4bn/- compared to 56.5bn/- offered to the market and at the end the government retained 43.7bn/- as successful amount. 

The 15.49 per cent coupon rate was offered in the 20-year instrument and the weighted average yield to maturity17.69 per cent. The rates are higher than any other long term debt instrument auctioned since January this year. 

“BoT is optimistic on the continued positive investors’ response on the debt instrument due to exchange rate stability and inflation rate as well as attractive rates,” he said. 

The said introduction of the 20-year instrument widen investors’ options and opportunities in the debt markets alongside other government securities like the two, five, seven, 10 and 15 years bonds. 

In the 20-year session held on Wednesday, commercial banks dominated the market activities followed by retail investors, insurance companies and pension funds. 

“Despite taking part in the session, retail investors showed high interest on the long term debt instrument,” he noted. 

The number of bids received during the session were 202 and 156 emerged to be successful bids. 

Mr Felix said also that for the government, raising funds through the 20 years Treasury bonds was good in executing and completing long term projects that will start generating income before the instrument matures. 

In East Africa, Tanzania is the second to have issued the 20 year debt instrument after Kenya that has been issuing it for a long time. 

Zan Securities Limited Chief Executive Officer, Mr Raphael Masumbuko, said that investors been waiting for long to have the 20 year instrument giving them more investment options. 

“Apart from high interest rates, strong investors’ appetite on the instrument is an indication that the other long term debt maturities have not quenched investors thirst,” he said.

He said for the government, that was an opportunity to raise funds for executing long term projects like industries, roads, railway, bridges, ports and airports expansion. 

The implementation of the projects would stimulate business growth, contribute to improved living standards and the government collects more revenue. 

Orbit Securities General Manager, Mr Simon Juventus, said should all conditions remain stable like inflation and exchange rates, the long term debt instrument will continue attracting huge investments. 

“As long as investors’ expectations are met, more investment flow will be seen on the government securities,” he said.

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Author: SEBASTIAN MRINDOKO

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