15-year Treasury Bond continues to exhibit lower subscription levels despite the rise in yields

Investors’ appetite for the 15-Year bond continued to exhibit relatively lower subscription levels compared to the 20-Year and 25- Year bonds, despite the rise in yields.

The Central Bank actively engaged in the market last week offering investors a total of 104bn/- through auctioning a 15-Year Treasury bond, featuring an annual coupon rate of 11.15%.

The auction garnered a subscription rate of 82.3%, with bids received amounting to 85.54bn/-and accepted bids valued at 74.31bn/-.

The weighted average yield to maturity experienced an increase of 32.9 basis points compared to the previous auction held in late March of this year, rising from 11.6264% to 11.9554%.

Yields have incrementally risen over the course of the last three auctions, accumulating a total of 75.38 basis points above the average yield observed in November 2022.

Furthermore, the price floor has declined from 97.65 to 93 during the same period. These developments persistently reflect the Central Bank’s reduced inclination towards accommodating monetary policies aimed at maintaining inflation within the target range.

Notably, inflationary pressures have been relieved to a significant extent in the months of April and May.

The inflation rate witnessed a decline of 70 basis points from March to May.

The Zan Securities Chief Executive Officer Raphael Masumbuko said, “In the short term, we expect a shift in investor preferences towards fixed income securities, driven by the upcoming auctions for 20-year and 25-year treasury bonds scheduled on June 21st and 28th respectively.

He added, “This transition is likely to gain momentum, particularly due to the Central Bank’s adoption of a less accommodating monetary policy, leading to an upward trajectory in fixed income yields”.

The Bank of Tanzania is expected to maintain this less accommodating approach in the near term, with a focus on maintaining low inflation levels.