The 15 year Treasury bond issued by the Central Bank mid-this week witnessed a low subscription rate 40.2 per cent against the backdrop of a low yield environment data from the Bank of Tanzania indicates.
The Central Bank was offering 135.7bn/- to investors with the auction envisaged to cater to investors who are interested in mid segments of the yield curve, of much of the current interest is on the long end.
According to BoT, The auction received bids totaling to 54.5bn/- and accepted 39.4bn/- out of the 135.7bn/- that had been sought.
Prior to this auction, the Central bank auctioned a 2-year treasury bond a fortnight ago, as it sought 130.7bn/- which was oversubscribed, highlighting investor’s preference for liquidity offered by short term papers.
In comparison to the previous 15 year auctioned early June this year, the weighted average yield to maturity increased by 14 basis points from 11.26 to 11.406 printed in the current auction.
Analysts however, project that yields at the belly of the curve will edge upwards as investors price in the auction result, while yields at the longer end of the yield curve will remain relatively steady.
According to the Zan Securities Chief Executive Officer Raphael Masumbuko, “An analysis of the auction result indicates low subscription rates as well as aggressive bidding partly due to investors pricing in rising inflation, and the prospects of a tighter monetary policy to be deployed by the Bank of Tanzania,”
He added, “In light of the tight liquidity, we anticipate sustained low subscription rates for medium term papers and an aggressive bidding in upcoming auctions more so on the longer term papers. Overall we expect to see a rebalancing for portfolio managers in preference for short duration papers less volatile to rising yields, as they will be keen on avoiding high duration instruments,”
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