DAR ES SALAAM: The 20-year Treasury bond recorded its first undersubscription in nearly two years last week, signalling a notable shift in long-end demand as the Bank of Tanzania (BoT) adjusted pricing expectations.
The BoT offered 200.81bn/- in the long-dated paper at an 11.0 per cent coupon, but the auction was undersubscribed at 77.58 per cent. Investors submitted bids worth 155.78bn/-, of which 79.88bn/- was accepted, marking the first shortfall in the 20-year tenor since November 2024.
Zan Securities Advisory and Research Manager Isaac Lubeja said yesterday that this decline coincided with a reduction in the coupon rate from 12 per cent to 11.0 per cent, which likely contributed to both the lower yields and the weaker investor demand observed in this auction.
“This marks the first undersubscription of a 20-year bond since November 2024 and only the fourth such occurrence in the history of 20-year Treasury bond auctions,” said Mr Lubeja.
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The 20-year Treasury bond’s undersubscription is an early indicator of changing investment preferences across financial markets.
Additionally, the BoT’s aggressive policy moves to lower the coupon rate to 11 per cent has effectively misaligned primary yields with current institutional riskreward expectations,driving a historical drop in subscription rates.
“Consequently, we foresee a prolonged period of higher yields in both primary and secondary markets as fund managers and banking treasuries will likely look to optimise yields,” Mr Lubeja said.
The weighted average yield declined 28.51 basis points to 10.4297 per cent, while the minimum successful price reverted to par from 109/2136 in the previous auction, reflecting the softer demand environment.
Secondary market activity strengthened in response, with turnover rising 27.5 per cent to 93.76bn/- despite a decline in the number of deals to 66 from 82, indicating larger institutional ticket sizes.
Trading was dominated by long-dated government securities, including a 10- year bond that generated 30bn/- in a single transaction and 15-year papers that contributed 41.72bn/- across multiple trades. Corporate bonds from issuers such as NMB, CRDB, ALBK and TCB remained subdued.