NMB's Jasiri bond oversubscribed

Dar es Salaam. NMB Bank’s three-year bond – which was issued in February this year - was massively oversubscribed as investors’ appetite for alternative investment options remain high in the market.

The bank announced last week that its Jasiri bond offer – which was opened February 7, 2022 and closed on March 21, 2022 – was oversubscribed by 297 percent.

NMB issued the bond in its effort to raise funds for extension of affordable financing for women-owned or women-controlled enterprises and/or businesses whose products or services directly impact a woman.

That is why the bank sought to raise Sh25 billion, which had a green shoe option of Sh15 billion, investors massively and snapped up the bond with a total of Sh74.26 billion in bids.

As a result, NMB sought and received approval of the Capital Markets and Securities Authority (CMSA) on April 11, 2022 and accepted all bids received for the Jasiri bond.

Analysts are of the view that the oversubscription means that liquidity in the market is high, thanks to increased government spending on development projects. A recent reduction in coupon rates on government securities, analysts say, could also be sending investors towards corporate bonds.

“It is an indication of increased liquidity in the market following government’s recent increased expenditure of Covid relief funds and also aggressive payment of internal debts to suppliers. Both auctions increased liquidity in the markets,” said an independent financial analyst, Mr Christopher Makombe.

He said the trend was likely to result in further drop in yields going forward towards 10 percent for long-term bonds.

According to the chief executive officer for Zan Securities Limited, Mr Raphael Masumbuko, the oversubscription of NMB’s Jasiri bond was a good indicator of capital market vibrancy in Tanzania because it was a clear indication that the market has good absorption capacity to accommodate large debt issuances.

“Furthermore, the recent Treasury bond coupon reduction will make the market more interested in corporate debt issues since they are benchmarked above government securities. We expect to see more corporate bond issues within the year,” he said.

While noting that the oversubscription for the Jasiri Bond was anticipated, the manager for advisory and capital markets at Vertex International Securities, Mr Ahmed Nganya, said they did not expect the rate to reach 297 percent. “This was way beyond our expectation…We think this increases confidence in the market and it shows that investors are always willing to invest in sound and attractive bonds with reasonable margin of safety and satisfactory returns,” he said.

He, however, noted that going forward equities could potentially pose a strong challenge to the bond market in the medium term if listed companies continue to post strong earnings.

Announcing the Jasiri Bond in February, NMB Bank Plc’s chief executive officer, Ms Ruth Zaipuna (pictured) said proceeds of the bond would be used to extend affordable financing for women-owned or women-controlled enterprises and/or businesses whose products or services directly impact a woman. Investors in the NMB Jasiri Bond will earn an interest rate of 8.5 percent per annum payable quarterly throughout the three years, until March 2025. The interest rate paid is subject to withholding tax deduction.

The NMB Jasiri Bond is part of the lender’s Sh200 billion Medium Term Note (MTN) Program that had mobilized a total of Sh148.2 billion in the past three tranches.