TMRC bond oversubscription imminent

THE debt market analysts have predicted oversubscription of a five-year 10bn/- mortgage bond launched yesterday due to its attractive rate.

The analysts said the bond issued by Tanzania Mortgage Refinancing Company (TMRC) expects to receive a high subscription rate of 10.20 per cent compared to its peers at 8.6 per cent.

Zan Securities Advisory and Research Manager Isaac Lubeja said the attractive rate of the bond compared to a similar tenured government bond is likely to be appealing to investors looking for higher returns.

“It is reasonable to expect that the TMRC’s corporate bond issuance will receive a high subscription rate.

“The issuance is well-positioned to attract investor interest and achieve a high subscription rate,” Mr Lubeja told Daily News yesterday.

Additionally, the historical performance of TMRC’s medium-term programme suggests that this issuance is likely to be oversubscribed. The previous three tranches were oversubscribed, indicating a high level of investors’ confidence in TMRC’s ability to meet its obligations.

Alpha Capital Research and Financial Analytics Imani Muhingo said the bond is good for both, the capital market and the real estate sector, as the issuer is an integral part of the mortgage and real estate financing.

“We expect a good reception from the market, possibly an oversubscription,” Mr Muhingo said.

The debt analyst, however, is wary of the current debt market happening where bonds’ yield curves are pointing north may derail some expectations of TMRC results.

“…Although the current fast evolving yield curve, with an upward shift, is making investors a bit warily on fixed income securities,” Mr Muhingo said.

TMRC will use funds sourced from the capital markets for lending to primary mortgage lenders at competitive rates to boost mortgage ownership in the country.

Equally, analysts have it that the exemption of interest received from corporate bonds from withholding tax provides a further incentive for investors to invest.

The 10bn/- fourth tranche went on offer yesterday and will be closed on the second Tuesday of next month and will be listed on Dar es Salaam Stock Exchange (DSE).

The bond also will offer a five-year Treasury bond coupon rate plus 50 basis point risk while being exempted from withholding tax on coupon payments.

The 10bn/- TMRC bond is the fourth tranche and part of the firm’s programme to raise 120bn/- that started in 2018.

The first tranche in June 2018 raised 12.52bn/- against an offer of 12bn/- representing a four per cent oversubscription.

The second tranche, where TMRC wanted to raise 8.0bn/-, was oversubscribed by over 16 per cent as investors responded with 9.28bn/-.

The third was oversubscribed by 26.8 per cent while the financial institution sought to raise 7.0bn/-.