Brokers expect 20-yrs bond’s oversubscription

According to the 12.10 percent fixed rate Treasury bond’s bids invitation announced last week, the government is expected to raise 178.5bn/- through competitive and 0.52bn/- through non-competitive, in a minimum bid sixe of 1mn/- in multiples of 100,000/-. 

 “This week there will be a 20-year Treasury bond auction. It is expected that demand will be high for the tenor as the market shifted from the equities to fixed income securities,” said a weekly market report by Exodus Advisory, broker and member of the DSE. 

 “As the market shifts away from the equities market, demand for fixed income securities is expected to increase. Given that is the last month of the government year, there is expected to be high demand in the last bond auctions.” 

BoT noted that the bond will be listed on the Dar es Salaam Stock Exchange (DSE) secondary trading in multiples of 100,000/- to commence on Friday, 23rd June 2023. 

Exodus Advisory has noted that equity market activity is expected to decline in the financial markets, as companies are currently undertaking the corporate actions. 

In its monthly report for May, the broking firm also indicated specifically that 20 years and 25 years Treasury bonds are expected to trade at a discount. 

“Due to lower demand for the other tenors, we expect the central bank to continue accepting significantly more bids than amount tendered,” it said, noting that 25 years remains the most demand bond in the market. 

On the bonds secondary market, the firm’s weekly report shows, activity increased by 46.23 percent where volume of transactions increased to 175bn/-, compared with 119.67bn/- recorded during the previous week. 

Demand notes were primarily the 20years and 25 years Treasury bonds. 

In April 2023, all primary auctions of government securities were undersubscribed; save for the 2- year and 25-year Treasury bond auctions, which were highly oversubscribed. 

BoT conducted the 2, 20, and 25-year Treasury bond auctions for government budgetary financing, with a combined tender size of 506.2bn/-. 

Total bids received amounted to 604.2bn/-, and the accepted bids worth 518.1bn/-. 

Weighted average yields for the 20- and 25-year Treasury bonds rose to 12.85 percent and 13.01 percent from 12.61 percent and 12.91 percent registered in the preceding auction, respectively. 

Meanwhile, on short term securities, the central bank issued a Treasury bills in the tenors 182 days and 364 days last week, whereby tenders for the 182 days was undersubscribed while the 364 days T- bills was oversubscribed. 

“This continues to indicate the higher demand for the 364 days tenor,” the broking firm has noted. 

The yield for the 182 days T-bills increased from 5.40 percent in previous auction to 5.81 percent in the latest auction. 

Conversely, the 364 days yield decreased to 7.14 percent from 7.22 percent recorded in the last T-bills auction. 

In May there was two T-bills auction conducted on 3rd May 2023 and 24th May 2023. Demand was primarily for the 1 year tenor across all auctions, which was oversubscribed by 71.32 percent. 

Back in April, the central bank conducted one Treasury bills auction with a tender size of 177.4bn/-, to cater for government budgetary operations and monetary policy operations. 

The auction was undersubscribed receiving bids worth 174.2bn/-, which were all accepted. The weighted average yield increased to an average of 6.65 percent from 5.81 percent in the preceding month.