Bank of Tanzania (BoT) said that there are multiple benefits for investors to invest in Government Securities besides other investable instruments, since it offers very competitive market interest rates.
The Central Bank informs the public that treasury bills and treasury bonds have the relatively risk free in credit and default risks because they are issued by the Government.
“The treasury bills and treasury bonds are transferable and negotiable. Can be pledged as collateral and the rate of return is competitive,” the BoT pointed out.
It noted: “The treasury bills and treasury bonds are standby credit facility that provides credit facility to commercial banks. Standby credit facility is available to all commercial banks which are Tanzania Inter-bank Settlement System (TISS) participants holding sufficient eligible securities and have signed the Master Repurchase Agreement (MAR). Standby credit facility includes Intraday and Lombard loan facilities.”
It further said that the treasury bills and bonds are debt instruments issued by governments in exchange for public funds borrowed.
Other benefit is that the treasury bills and treasury bonds are auctioned in the primary market in accordance with the Bank of Tanzania's issuance calendar, using competitive and non-competitive tender systems, and are continuously sold and purchased in the secondary markets.
The other benefits is due to the fact that bidding in the auction follows multiple pricing models, which means that bidders can submit multiple bids for each maturity at different prices. The auctions are based on the government's issuance plan for the fiscal year.
The Bank of Tanzania publishes the yearly issuance calendar based on the issuance plan to assist investors in planning their investments.
It went further said that the treasury bills are short-term debt securities that mature within a year. They are typically quoted at a discount, which means that the price paid today is less than 100/=, and the investor is paid 100/= at maturity. Treasury bills have a minimum bid of TZS 500,000. (Five Hundred Thousand Tanzania Shillings).
The Bank of Tanzania issues Treasury bills with maturities of 35, 91, 182, and 364 days.
Treasury bonds are long-term debt securities issued by the government to fund government projects, typically development projects.
The Bank of Tanzania issues Treasury bonds with maturities of 2, 5, 7, 10, 15, 20, and 25 years. They have a fixed interest rate (coupon).
“Treasury bonds have a minimum bid of TZS 1,000,000. (One Million Tanzania Shilling). The prices quoted can be Premium, Par, or Discount.
Treasury Bills Market
“The Bank of Tanzania conducted two Treasury bills auctions in August 2022, worth Tsh213.5 billion, mainly for government budgetary operations and liquidity management,” the latest BoT’s Monthly Economic Review (MER) for September said.
The MER added: “Bids received amounted to Tsh167.9 billion, implying an under subscription of Tsh45.6 billion. Successful bids amounted to TZS 163.3 billion. Overall weighted average yield decreased to 4.31 percent, compared with 4.52 percent recorded in the preceding month.”
The MER underscored that the Bank of Tanzania auctioned 2-, 5- and 15- year Treasury bonds on behalf of the Governments in August 2022, with a tender size of Tsh131.1 billion, Tsh135.2 billion and Tsh136.2 billion, respectively.
It also said that the 5- and 15- year Treasury bond auctions were undersubscribed, while that of 2-year Treasury bonds was oversubscribed.
“Accordingly, total bids amounted to Tsh284.9 billion, of which Tsh252.7 billion were successful. In line with the low demand, yields to maturity for 2-, 5- and 15- year Treasury bonds increased to 7.93 percent, 9.08 percent, and 11.41 percent from the rates that were recorded in the preceding auctions, respectively,” the MER said.
Ends
