2-Year Treasury bond subscribed by 108% on investors’ appetite for short-term papers

The 2 years Treasury bond auctioned last week was subscribed by 108%, receiving bids totaling 157.05bn/- available data from Bank of Tanzania (BoT) shows.

The Central Bank was in the market last week offering 146bn/- to investors for a new 2-Year Treasury bond offering a 7.6% coupon rate annually.

This auction was catered for investors with more preference for short-term papers.

The central bank accepted bids totaling 154.25bn/- billion preventing aggressive bids in deep discounts.

Being only the second 2-year auction since the start of the year, demand in this auction increased receiving subscription of 108% relative to the previous auction held in January which was subscribed by only 76%.

The stop rate has gradually been lowered to 96.177 from 98 in August last year underscoring continuing lessened monetary policy accommodation.

Average yields have been also increasing in the same period reflecting the central bank’s policy stance. The weighted average yield to maturity lost 24.71 basis points however compared to the previous auction despite the minimum price being lowered to 96.177 from 96.2177 in the last auction held in January.

Secondary market

The overall turnover for trading session last week increased by 56% from 20.74bn/- registered in the previous week to 52.40bn/-

The number of trades increased from 31trades recorded in the previous trading week to 40 trades.

Overall tenures traded were predominately on the long end of the of the yield curve, the off-the-run 15 year accounting for 53.59% of the traded volume.

Market analysts however expect trading activities to slightly increase this week

According to Zan Securities Chief Excutive Officer Raphael Masumbuko, fixed income activities will be slightly elevated this week as the market adjusts positions ahead of the 25y Treasury bond auction scheduled for 10th May 2023.

“We expect the auction to oversubscribe with yields edging slightly upwards. Overall year to date the yield curve continues to steepen across the curve highlighting investors’ demand for higher rates,” Masumbuko said.