DAR ES SALAAM: STRONG investor demand for Treasury bills and declining short-term yields point to ample liquidity in financial system, creating conditions that could support further gains in equities in the coming weeks, according to Zan Securities.
Zan Securities Advisory and Research Manager Isaac Lubeja said in the Weekly Wrap Up yesterday the oversubscription recorded across all Treasury bill maturities indicates investors remain confident in government securities despite larger auction sizes, while falling yields may encourage institutional investors to seek higher returns in the stock market.
“Strong demand was therefore observed across all maturities in the latest Treasury bill auction,” Mr Lubeja said. The Bank of Tanzania (BoT) offered 49.9bn/- in 35- day Treasury bills, 69.9bn/- in 91-day paper, 79.9bn/- in 182- day bills and 89bn/- in 364-day securities at last Wednesday auction.
“Demand exceeded supply across every tenor,” he said.
The 35-day bill attracted subscriptions equivalent to 300.6 per cent of the amount offered, followed by the 364- day bill at 293.61 per cent, the 91-day bill at 171.7 per cent and the 182-day bill at 148.94 per cent. He said the central bank allotted the full amount offered for each maturity.
Yields continued to ease on the 35-day, 91-day and 364- day Treasury bills, reflecting strong demand and abundant liquidity.
The weighted average yield on the benchmark 364- day bill declined to 7.0258 per cent from 7.1175 per cent in the previous auction, while the minimum successful price rose slightly to 93/2638 from 93/1800.
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“The continued decline in short-term yields signals improving liquidity conditions and may encourage investors seeking stronger real returns to gradually rebalance portfolios towards high-dividend equities, provided the macroeconomic environment remains supportive,” Lubeja said.
Secondary bond market activity also strengthened during the week ended 17 July. Turnover rose 42.59 per cent to 132.07bn/- from 92.62bn/- in the previous week across 273 transactions, driven largely by trading in long-term government securities.
The 20-year 12.25 per cent Treasury bond accounted for 206 trades worth 60.31bn/-, nearly half of the week’s turnover. Large institutional transactions in the 20-year 12.1 per cent, 15-year 12.25 per cent and 25-year 13.75 per cent Treasury bonds also supported activity.
Looking ahead, Lubeja expects the Dar es Salaam Stock Exchange (DSE) to retain a positive bias, supported by strong domestic liquidity, resilient institutional demand and stable interest rate expectations.
While banking stocks are likely to remain the main focus because of their earnings strength and dividend prospects, he said market leadership could gradually broaden to include fundamentally strong industrial counters.
He added that although foreign investors remained net sellers during the week, the slowdown in outflows suggests external selling pressure is easing.
Even so, the stock broker said, investors should expect more selective trading as attention shifts from broad market gains to company fundamentals, earnings resilience, dividend expectations and valuations.