DAR ES SALAAM, TANZANIA - Efforts by the Bank of Tanzania (BoT) to raise yield rate for a two-year treasury bond failed to generate the full amount it anticipated to rise during the lasy Wednesday auction.
The Central Bank raised the yield rate to 17.85 % from 7.82 %, but managed to get about one-third of the required tender amount. The BoT had targeted a raise of Tshs Tshs 35bn (US$21.87million).
In the Wednesday auction, bidders offered Tshs 43.8bn ($27.37million) which was accompanied with high coupon rate compelling the Central Bank to accept only Tsh 10bn ($6.28million).
Tanzania Securities Business Analyst Joel Nkya said that due to scarcity of liquidity in circulation the Central Bank had little choice than to increase the yield to raise the required amount.
"This shows that the Government needs cash and it is ready to pay for 17 %," Nkya said in Dar es Salaam last week adding: "Don't forget the tight liquidity stance in the market."
In the letter of intent sent to the International Monetary Fud (IMF) last month, the Government announced it had taken tight fiscal plans to cut spending by Tshs 755bn/- ($471,87million) in this financial year 2011/12 that would affect some development projects.
The move, according to the Minister for Finance and Economic Affairs, Mustafa Mkulo, is expected to reduce the widening budget deficit caused by low aid inflows from donors, who themselves face debt crisis at home.
Commenting on the bonds, the Standard Chartered Bank said the two-year Treasury bond would shed further light as to whether investors "truly believe that rates are easing."
The country leading banks in terms of profit and customers' deposit, the National Microfinance Bank (NMB), noted the money markets that liquidity stance continued to ease with overnight rates showing a decreasing trend. "The Central Bank accepted Tshs 10bn only of the Tshs 43.8bn/- tendered raising the Weighted Average Yield to 17.85 % in the T-Bond auction held last Wednesday," NMB said in its e-market daily report.
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