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T-bill yields to drop more as govt cuts costs

THE Treasury bills trends have portrayed slim chances of near future significant up swing of yields based on the government move to cut cost of borrowing.

The bills yields and subscription levels started going down since January to reach historical low last week.

For instance, 365-day yield opened a year at 5.91 per cent and closed the last Wednesday auction down to 3.93 per cent, while the 35-day yield was 2.60 per cent compared to 1.99 per cent of last week auction.

The 91 and 182 days also opened at 3.50 per cent and 4.24 per cent and last auction in July were 2.42 per cent and 2.58 per cent respectively.

Low yields, according to some debt analysts, despite being a major investment instrument are putting off investors, most financial institutions from buying them.

Orbit Securities Head of Research and Analytics Imani Muhingo showed pessimism of near future bill yields up swing based on the government move to cut borrowing costs.

“I doubt that there will be any significant up swing of T-bill yields in the near future, especially with the government’s deliberate move to lower its cost of borrowing,” Mr Muhingo said. The bills mainly issued to meet short-term mismatches in receipts and expenditure.

In recent days, the T-bill yields rates dropped to drastically low level, now forcing investors to look at other options for liquidity management.

Last Wednesday auction results painted to rather a new picture as rates plummeted to less than deposit rates and fixed deposit receipts (FDRs) from commercial banks.

According to Bank of Tanzania (BoT), the one-year overall deposit rate stood at 7.54 per cent for the year ending June, while last month’s inflation stood at 3.3 per cent.

This forced other investors to opt for fixed deposits instead of T-bills which had limited returns compared to the latter.

Zan Securities Chief Executive Officer Raphael Masumbuko also predicted the bills yield rates were on the downward trend.

“We expect the yields to continue decreasing in the next auction for the Treasury bills,” Mr Masumbuko said before the last Wednesday auction.

Tanzania Securities also said at their pre-last week auction that the bills were going to be undersubscribed since investors had started shying out securities due to declining yields.

“Furthermore, the government securities yield curve will continue remaining normal, with expectations that the yields will improve after reaching a resistance level,” Tanzania Securities said.

CROSS-BORDER trade recorded a surplus ...

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Author: ABDUEL ELINAZA

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