Debt analysts predict that the five-year Treasury bond will be oversubscribed, but without a significant change in the rate of return.
The bond, which is the last of this fiscal year, is now under the hammer and its trend, analysts say, is on previous auction hunting for bonds and short-term instruments.
Zan Securities chief executive Raphael Masumbuko said most debt investors opt for longer-term government bonds because of the yields offered, not the short-term.
“Investor appetite appears to be for longer-term securities, which offer higher yields. »We anticipate that this notion will be reflected on [today’s] in the 5-year Treasury bond auction, which is the last auction for the 2020/21 fiscal year, ”said Mr. Masumbuko.
The government now wants to borrow some 101 billion / – from the public over five years at a fixed coupon rate of 9.18%.
Vertex International Securities, director of advisory and capital markets, Mr. Ahmed Nganya, said the results of the treasury bill auctions in the middle of last week signaled a change in the yield trend for short-term treasury bills. .
“We are waiting [this] auction of the 5-year bond to oversubscribe without significant change in yield, ”Nganya said.
Mr Nganya said last week’s auction results for Treasury bills saw the weighted average yield of 364 bills continue to decline to an 11.34% drop from the previous auction.
The BoT offered the usual size of 76.7 billion / – but the public offered 144.94 billion / -.
“The BoT took less than the size offered despite a nice oversubscription in the Treasury bill auction,” Orbit Securities said in its weekly market summary report.
In the end, for the auction, the central bank only accepted 30.7% of the size of the tender or 44.5 billion / -.
The weighted average yield to maturity for the 182-day term gained 4 basis points (bps) to 3.57% while the 364-day term lost 67 bps to 5.24 percent. The 35-day and 91-day terms were canceled after receiving no offers.
However, to attract more bond investors, the finance ministry has proposed exempting junior government bonds from interest income tax.
The Minister of Finance and Planning, Dr Mwigulu Nchemba, presented the 2021/22 budget proposing to expand the scope of the exemption from income tax on interest derived from treasury bills .
“This measure aims to extend the exemption to promote investment in treasury bills …”, Dr Nchemba told the House last Thursday.