High yields for T-bills fail to attract bidders

The headquarters of the Bank of Tanzania. PHOTO | FILE

What you need to know:

  • Investors’ appetite on the short term government debt instruments has continued to remain low, after the Treasury bills floated on Wednesday this week ended up being undersubscribed by 30 per cent

Dar es Salaam. The Treasury bills floated by the Bank of Tanzania on Wednesday this week ended up being undersubscribed even as yields have been increased, indicating low investor appetite on short term government debt instruments.

The BoT auction results show that a total of 130 bids worth Sh105.4 billion were tendered against Sh141 billion offered, with no bids were recorded for 35-days and 91-days maturities.

At the end of the auction, the central bank accepted only 127 bids valued Sh104 billion.

This indicates that three bids were rejected, mainly on six and twelve-month maturities.

The six-month maturity received 12 bids worth Sh23.2 billion but only 11 bids valued Sh22.2 billion were accepted; while the one-year maturity received 118 bids valued Sh82.1 billion but only 116 bids worth Sh81.7 billion were successful.

“This indicates that investors are now seeing that investing in long term maturity pays more than short term maturity,” said Mr Raphael Masumbuko, the chief executive officer of Zan Securities.

“I think what investors see is that there is a prediction of promising future and there is uncertain in short term,” he added.

Mr Masumbuko said there was also some sort of liquidity problem as banks, that form the main investors in government debt instruments, were currently writing off nonperforming loans.

He said banks were targeting promising yields which could help them to get returns which were sufficient to pay depositors.

The weighted average yield (WAY) increased to 7.41 per cent during the Wednesday’s floating higher than 6.75 per cent recorded during the previous auction held two weeks ago.

According to the auction results, yields for 35-days and 91-days were zero rated from 2.72 per cent and 2.98 per cent during the previous auction held on October 4, respectively.

The yields for six months and one year were raised to five per cent and 8.07 per cent respectively from 4.98 per cent and 7.97 per cent recorded during the previous auction.