110pc subscription for 15-year Treasury Bond

Dar es Salaam. Investors’ appetite for government’s risk-free debt instruments remained high this week, resulting into the oversubscription of a 15-year Treasury Bond on Wednesday despite a fall in yields.

The T-Bond carried a yields-to-maturity rate 14.5 percent, the lowest since late 2018. Throughout 2019, the yields-to-maturity rate has been from 14.6 per cent and above.

Analysts say the drop in yields explains the ever-rising investors’ demand for the government debt instruments which are almost risk-free compared to other investment avenues.

The Bank of Tanzania (BoT) sought to collect Sh109 billion through the 15-year T-Bond to partly finance the government’s revenue and expenditure plan.

However, it (the BoT) ended up receiving a total of 193 bids, valued at Sh229 billion, for the T-Bond, signifying a 110 per cent oversubscription.

This means that the BoT had to return Sh120 billion to investors.

A director of Arch Financial and Investment Advisory Limited, Mr Mazengo Kasilati, told The Citizen a drop in yields explains the rise in the number of investors interested in such investment avenues.

With high demand, they are cajoled into tendering at lower prices as a way of increasing their chances for bidding successfully.

“With higher demand, they bid at a lower price which finally affects the maturity returns,” he said. The summary shows that investors bid between 98.5/100 and 86.5/100 but minimum successful price was 92/100.

The weighted average price for successful bids was 93.9/100.

The rate for coupon yield also lowered to 14.3 percent from 14.9 percent during the previous 15-year Bond auction that was conducted on January, 29.

Elsewhere, yields on bonds globally have been going down, largely due to the threat posed by the coronavirus to the global economy.

In the United States, a 30-year T-Bond fell below two percent, while the 10-year note also hit its historic low this week.