2-year Treasury bond subscribed by 119 pct on investors’ appetite for short-term papers

Investors’ appetite for short-term government papers continued to remain high after the two-year Treasury bond floated by the Bank of Tanzania (BoT) last week ended up being subscribed by 119%.

The Central Bank conducted an auction offering 139bn/- to investors for a new 2-Year

Treasury bond, featuring a 7.6% coupon rate with the auction targeting investors with a preference for short-term government instruments.

According to available date from the BoT, the auction received a subscription of 119%, with bids totalling 166.38bn/- , of which accepted bids amounted to 149bn/-

This auction marked only the third 2-year auction since the beginning of the year, and it witnessed increased demand, with a subscription of 119% compared to the previous auction held in April, which had a subscription rate of 108%.

The price floor for the bonds has cumulatively decreased from 98 in August of the previous year to 96.5275, indicating a reduction in the Central Bank’s accommodative monetary policy stance.

Furthermore, average yields have been on the rise during this period, reflecting the central bank’s policy stance.

The weighted average yield to maturity increased by 40.87 basis points compared to the previous auction.

The Central Bank plans to continue implementing aless accommodative monetary policy in the year 2023/24 to achieve inflation and growth objectives.

In the first half of the year, the implementation of monetary policy will be based on the current monetary targeting framework, while in the second half, an interest rate-based monetary policy framework will be utilized.