"We expect the issue to see low turnout due to the timing as the first quarter tax outflows will coincide with the auction," stated the Standard Chartered Bank in its Daily Market Commentary.Likewise, the market is expecting 38.45bn/- maturities this week.
The rising overnight lending rates ranging between 17 and 20 per cent is one of the major factors that could lead to reduced investments on the treasury bills."Commercial banks, which are among the major investors in government securities prefer to invest on overnight transactions due to high returns offered," commented the Tanzania Securities Limited (TSL).
For example, the Treasury bond auction last week was slightly oversubscribed by 12.7 per cent due to the overnight lending rates that edged northward. Lending is one of the core business of almost all banks thus where returns are attractive, hefty investments are pumped.
The forthcoming tender, the bank seeks to raise 35bn/- in 364 days offer, 30bn/- in 182 days, 30bn/- in 91 days and 5bn/- in 35 days tenure. The previous treasury bills auction conducted two weeks ago saw the deal being undersubscribed, a trend attributed to Central Bank (BoT)'s tight liquidity measures.
In the long run however, interest rate is expected to stop falling as long as activities on the equity market gain momentum that would discourage demand for government securities. The interest rate for the 364 days offer was raised to 13.38 per cent compared to 12.38 per cent of the previous market.
Commercial banks have remained to be the giant investors in government securities contributing above 60 per cent of the total market share. Pension Funds, insurance and few micro-finance firms are among the key investment players in the instruments.