Tanzania's latest bond auction undersubscribed

Jun 09, 2015

The Government blamed tight liquidity for the poor result.

A liquidity squeeze among investors was blamed for the weak performance of Tanzania's latest treasury bill auction.

The government initially planned to raise Sh135 billion (€55.3 billion) but only Sh49.5 billion was tendered.

Bank of Tanzania's associate director Paul Maganga told Tanzania Daily News that most investors including commercial banks and corporate clients are fulfilling their tax obligations for the financial year 2014/15, which could explain their low participation.

This contrasts with last October's bond auction, which was oversubscribed. It attracted bids worth Sh71.6 billion, although Sh62 billion was originally sought.

US rating agency Standard & Poor's (S&P) warned at the end of last year that the financial costs associated with the issuance of eurobonds will now be greater for African countries.

“The heydays of bond offerings from newcomers or from frontier markets, like the African issuers we have seen over the last couple of years, have ended. Periods of "oversubscribed bond offerings and very narrow, very tight spreads are over," said Konrad Reuss, Head of S&P’s sub-Saharan Africa unit.ADNFCR-2976-ID-801790402-ADNFCR