Bank of Tanzania

Despite a downward trend of interest rates, investors’ appetite remained higher in tendering for the government short term instrument, with an oversubscription signifying increased market liquidity.

According to the Bank of Tanzania (BoT) the average interest rate was lowered to 14.6 per cent, but the move could not prevent bidders’ appetite that made total amount tendered jump to 440.3bn/- against 100bn/- that was on offer.

Early signs of easing liquidity stance in the market was witnessed in the previous auction conducted two weeks ago that saw the total amount tendered jumping to 169.3bn/- against the 100bn/- that the central bank had sought at an average interest rate of 17 per cent.

On average, the results for the last Wednesday auction show that the 364-day bill yield rate dipped to 15.3 per cent from 18.4 per cent of the previous market while the 182-day bill rate dropped to 16.2 per cent from 17.7 per cent.

“The results serve to show that the Central Bank on behalf of the government demand for shillings is  declining to inevitable increasing market liquidity,” stated the Standard Chartered Bank daily commentary. And should the trend continues, the bank report said it will put downward pressure on the curve especially should the short term instrument auction size be maintained at 100bn/-.

Likewise, rate of returns for the 35 days and 91 days offer went down slightly from 10.7 per cent and 13.7 per cent to 7.7 per cent and 13.2 per cent respectively.   Since the beginning of the year the market has seen improved performances on trading of government securities compared to the preceding period that saw deteriorating investors’ appetite.

Analysts maintain that as interests on the government securities take a downward trend, large investors are expected to channel their funds back into the stock market in the coming weeks to explore advantage of the awaited dividends and long term prospects of stock appreciation on the equity market.

Over 60 per cent of the key players of long term maturities are commercial banks, with only five per cent being retail investors. Others are pension funds, insurance companies and a few micro-finance institutions.

By SEBASTIAN MRINDOKO, Tanzania Daily News

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