The demand for Treasury bills (T-bills) has recently risen from Tshs 99.187 billion at auction price to Tshs 185.02 billion at auction price, resulting in an increase in yields in the Tanzania Securities, which is attributable to the fact that investors were seeking to invest as much as possible before the yields dropped.
According to a summary report by the Bank of Tanzania (BoT) on the T-bills trading, the weighted yields across the board increased from 12.57 percent during the previous auction to the most recent record of 13.12 percent
In addition the number of bidders also increased from 140 applicants, 111 of which were successful, to 222 applicants, of which 145 were accepted.
The decision to shift from using local currency to using T-bills came from money dealers as a result of the depreciation of the local unit in the Inter-bank Foreign Exchange Market.
Following this decision, the number of bids that were received exceeded the amount that was offered by Tshs 58.03 billion as the bank’s offer increased from Tshs 108 billion in the previous auction to Tshs 128.937 in the most recent auction.
In previous auctions the amount that had been offered stood at Tshs 8.812 billion more than the amount that had been estimated.
For example, the BoT sold bills of Tshs 128.937 during the most recent auction against bills that were worth Tshs 84.153 billion and had been sold as such at the previous market.
Demands for maturities of 35-,91-,182- and 364-day stood at Sh17.604 billion, Sh50.264 billion, Sh48.972 billion and Sh68.178 billion against the previous offer of Sh17 billion, Sh30 billion, Sh44 billion and Sh36 billion respectively at the earlier auction.
Yields for these extended maturities either increased or remained fairly steady at 7.52, 12.26, 14.88 and 14.99 percent respectively at the most recent auction as compared to the week’s prior, which saw yields of 7.56, 11.71, 14.4 and 14.48 percent respectively.
In order to maintain the desired level of liquidity, during the most recent auction, the BoT accepted bids worth Sh128.937 billion, or 69.69 percent, of the total demand as compared to the bids that were accepted in previous auctions worth Sh84.153 billion, or 84.84 percent, of the total demand.
At the same time, the BoT monetary policy for the month of February has indicated that the interest rates will continue to be market determined and the bank will continue to utilize the Government of Tanzania Securities along with the sales from foreign exchange as a way of reducing the growth in rates.
Forecasts from the bank have indicated that the interest rates are expected to remain somewhat stable for the remainder of the calendar year due, in part, to the need to attract clients who can be classified as creditworthy immediately following the global financial crisis.