THE shift of investors’ appetite into other asset classes like equities may have contributed to the low demand for the 10 years treasury bonds auctioned by the Bank of Tanzania (BoT) on Wednesday that ended the trading session undersubscribed by 97 per cent.
The BoT auction summary shows that the government wanted to raise 133bn/-, however ended up raising only 36.03bn/-, which is almost four times decline. Funds raised from the long term government instruments including the 10 years bond auctioned last Wednesday are used to finance the long term infrastructure projects as well as settling some maturing debts.
The government has invested heavily in projects that range from small, medium to mega cutting across almost all sectors of the economy including infrastructures, education, health, agriculture, financial services, water and industries.
Out of the 36 bids received only 26 emerged successful, a clear indication that some investors’ bidding price was high above the offer that would be expensive for the government to pay when they mature. The highest bid offered at the auction was 101.00 while the minimum bid/100 was 88.92.
The minimum successful price/100 was 96.63 and the weighted average price for successful bids was 99.05. Also, the weighted average yield to maturity was 11.60 per cent slightly lower than 11.56 per cent of the previous sale of 10 years treasury bonds auctioned in December last year.
As prices fall, yield rates head north. On the other hand, the weighted average coupon yield rate was 11.54 per cent down from 11.50 per cent of the preceding sale of the 10 years bond.
However apart from the low investors’ appetite on some instrument, the long term maturities have continued to capture investors’ attention and participation, signaling a possible high level of liquidity in the circulation.
Some of the key local investors in the long term government paper are commercial banks, insurance companies, pension funds and some microfinance institutio