In a public notice issued by Bank of Tanzania (BoT) ahead of the auction day, the government is planning to raise 100bn/- through tendering 364 days T-bills for 35bn/-, 182 days 30bn/-, 91 days 30bn/- and 35 days 5bn/-. But apart from attractive package of high rate of returns, the one year T-bills auctioned previously ended up under subscribed with government accepting bids worth only 13.5bn/- out of 70.6bn/- of the total amount tendered.
Analysts forecast Wednesday's one year treasury bills auction to record high rates for investors and the government to accept borrowing in short term than in medium to long term instruments. Also there are expectations that the Central Bank will continue with the tight monetary policy until inflation eases.
"We expect further increase of interest rates equivalent or above inflation rate geared at protecting investors' money from loss," said Mr Raphael Masumbuko, the Zan Securities Limited Chief Executive Officer in an interview in Dar es Salaam on Monday.He said as long as inflation rate remained high, the rate of return on government securities will soar despite declining fuel prices and foreign exchange adjustments which have directly resulted into stabilization of the shilling against major world currencies.
The direction of the yields going forward would further be determined by a continued decline in the cost of living and government borrowing requirements. The cost of living in this context is determined largely by fuel prices, power charges and food prices, which have of recently remained higher.For example, the prices of sugar, maize grain and flour, rice, beef and variety of vegetables have continued to rise, thus putting little hope for inflation to drop.
According to the National Bureau of Statistics (NBS), the 12 month index change for food consumed at home and away from home went up to 24.7 per cent in the year ended November last year as compared to 22.8 in October 2011. Likewise, the 12 month index change for non- food inflation increased to 12.6 per cent in the year ended November 2011 from 12.2 per cent registered in the October, last year.
"The overall sentiment on government securities, however, continues to be weak with little interest seen even from the regular investors like pension funds and banks," stated the daily commentary by the Standard Chartered Bank.