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Investors’ appetite on 20-year Treasury bonds high

INVESTORS’ appetite on the 20 years Treasury bond auctioned last week was high making the instrument to end the trading session oversubscribed.

Through the debt instrument auctioned by the Bank of Tanzania (BoT), the government wanted to raise 117bn/-but the amount tendered jumped to 230.6bn/-which is over two times the amount sought to be raised.

However, the amount tendered was lower in the last week’s trading session compared to 276.86bn/-of the session held last month.

Nevertheless, apart from the oversubscription the government retained only 200.7bn/-as successful amount.

The government raises funds through the 20 years Treasury bonds and other debt instrument to fund the long term projects that will start generating income before the instrument matures.

Some of the long term infrastructural projects that benefit from the funds include hydropower, roads, railways, bridges, ports, airports as well as social services like hospitals and schools.

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

This is the second 20-year debt instrument to be auctioned this year and the tenth since when it was introduced in the market two year ago.

High appetite continued to characterise all the sessions to oversubscription.

According to BoT, stable exchange and inflation rates are among the major factors that make the 20 years treasury bonds to be attractive to investors.

The 15.72 percent coupon rate was offered in the 20-year instrument held on Wednesday slightly down compared to 15.85 percent of the session held in April this year.

The weighted average yield to maturity declined slightly to 15.72 percent compared to 15.85 percent of the previous session that took place in April this year.

The yield rates in the 20 years Treasury bonds has been one of the highest offered in long term debt instrument auctioned since January this year.

The number of bids received during the session were 300 and 282 emerged to be successful bids.

The institutional investors are commercial banks, pension funds, insurance companies and some microfinance institutions.

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

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

NBC Tanzania bank has been ...

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Author: DAILY NEWS Reporter

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