T-bill yields likely to hover around 8.5 pc

DAR ES SALAAM: Money market analysts are optimistic that the long-term Treasury bill that goes under the hammer today will be attractive to many investors because of its profitability.

They say that yields for 364 Treasury bill would likely hover around 8.5 per cent which will increase investors’ appetite and push for oversubscription.

However, the analysts are worried that the US 10-year bond with an attractive yield of 5.0 per cent may sway the appetite for local bill.

Zan Securities Chief Executive Officer Raphael Masumbuko said on Tuesday that increasing yields in the 364-day bill might overshadow the 35 and 91-day papers, potentially leading to reduced subscriptions.

“The bill yields are projected to hover around 8.5 per cent, making the short-term papers attractive,” Mr Masumbuko said.

The Zan CEO said the rise in yields could be attributed to several factors, including “high budget financing need, an environment carrying inflationary risks, and investor expectations”.

Zan Securities also anticipates low subscription levels for the 35 and 91-day bills because investors will concentrate on activity in the 364-day paper which may push its subscription levels up.

Money markets analysts also peg their yields increase projection by looking back on the last two previous T-bills auctions where rates for 182 and 364 days bills grew at respective rates of 3.02 per cent and 6.47 per cent.

Vertex International Securities CEO Mateja Mgeta said that they expect investors’ appetite will lean more on 182 and 364 days bills, with the latter taking a larger chunk of investors’ money.

“Our expectations are the yields will continue to increase in the upcoming auction,” Mr Mgeta told the ‘Daily News yesterday.

On top of that Vertex head said the increase of the US 10-year securities with 5.0per cent yield may have a considerable impact on today’s auction results.

“We think a recent increase in the US paper will have a considerable impact on [today] auction with investors eyeing to hedge against exchange rate impact,” Mt Mgeta said.

The hedging is due to the US dollar supply and demand trend in the economy.

World Bank President Ajay Banga was quoted yesterday, during the annual Future Investment Initiative (FII) in Riyadh, saying that the US 10-year Treasury (yield) just crossed 5.0 per cent briefly on Monday.

“These are areas we haven’t seen. So yes, that is right there lurking in the shadows,” Mr Banga said, referring to a rise in the benchmark for borrowing costs around the world which further threatens an economic slowdown.

Meanwhile, last week on the fixed income securities market, bond turnover went up by 7.0 per cent after a 19 per cent deceleration the previous week.

The total bond turnover for the week was 72.06bn/-. Approximately 99.6per cent of the total bonds turnover originated from the 20-year and 25-year tenors in 60 deals.

The total number of deals in the bonds market was 73 deals for the week, while only two deals originated from the corporate bonds segment.