Treasury bond attracts investor appetite

TANZANIA: THE latest two-year Treasury bond attracted bids almost four times the amount on offer, signaling sustained investor confidence in government securities as declining yields failed to dampen demand for fixed-income assets.

The Bank of Tanzania (BoT) said investors submitted 438.11bn/- in competitive bids for the 9.5 per cent Two-Year Treasury Bond auction held on Wednesday, compared with 111.15bn/- offered under the competitive window.

The sale was oversubscribed by 326.96bn/-, allowing the central bank to maintain its targeted borrowing despite rejecting a large share of applications.

The outcome highlights continued demand for sovereign debt from banks, pension funds, insurance companies and other institutional investors, which increasingly view Treasury securities as a safe investment amid stable macroeconomic conditions and ample liquidity in the financial system.

The BoT received 82 competitive bids, accepting 34 that together matched the amount offered. The remaining bids were rejected, despite reflecting investors’ willingness to lend substantially more than the government sought to raise.

The auction also included a non-competitive segment, typically used by smaller investors who agree to accept the weighted average price determined through competitive bidding.

The central bank received 11 non-competitive bids worth 338m/-, all of which were accepted. However, that segment remained well below the 27.8bn/- allocated, leaving it undersubscribed by 27.46bn/-.

Successful bids cleared at a weighted average price of 101.9580 per 100, while the minimum accepted price stood at 101.1680 per 100.

The highest competitive bid reached 104.5913, compared with the lowest submitted price of 82.1515, reflecting a wide range of investor expectations over the bond’s value.

The auction produced a weighted average yield to maturity of 8.4033 per cent, below the bond’s fixed 9.5 per cent coupon rate.

The difference indicates investors were prepared to accept lower effective returns than the coupon offered, a sign of strong demand that pushed prices above par. The weighted average coupon yield was 9.3176 per cent.

The bond will mature on July 30, 2028, with coupon payments scheduled every six months on January 30 and July 30.

The results extend a pattern of robust participation in Tanzania’s domestic debt market, where Treasury securities have consistently attracted healthy demand despite periodic changes in yields.

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Oversubscribed auctions typically allow governments to finance budget needs at competitive borrowing costs while providing investors with relatively secure assets backed by the sovereign. For policymakers, strong demand for government paper also reflects confidence in Tanzania’s fiscal and monetary management.

The ability to attract bids well above the amount offered suggests liquidity remains abundant in the banking sector and institutional investors continue to favour fixed-income instruments as part of their portfolio allocation.

The latest auction reinforces the government’s ability to mobilise domestic financing through the capital market while supporting the continued development of local debt market, an increasingly important source of funding for public investment without excessive reliance on external borrowing.