Tanzania’s Treasury Bills Market Witnesses Declining Prices and Improved Yields
A recent analysis conducted by Tanzania Securities has shed light on the evolving trends in the country’s Treasury bills market. Over the past nine months, the minimum successful bids and weighted average prices of Treasury bills have witnessed consecutive declines, signaling a shift in investor sentiment.
While these bills are still considered low-risk investments with competitive yields, individual investors seeking higher returns and long-term growth may find alternative options more appealing. On the other hand, institutional investors, such as banks and insurance companies, continue to value Treasury bills for their liquidity purposes. Let’s delve into the findings of the analysis.
Institutional Value: Treasury Bills Remain Crucial for Liquidity Purposes
The analysis reveals a consistent decrease in the average prices of Treasury bills over the last nine months. For instance, the bills’ prices dropped from their highest point of 99/84 in the auction held in August to 99/67 in the most recent auction conducted in May.
Notably, the last five auctions recorded the same price of 99/67, indicating a stabilization of prices. However, despite the declining prices, the weighted average yields of Treasury bills have shown improvement. They have risen from their lowest value of 1.68% in August to 3.45% in the latest auction, indicating a positive trend.
Investor Preferences: 364-Day Treasury Bill Dominates Transactions, While Individual Investors Seek Higher Returns
Among the various Treasury bills, the 364-day bill has garnered the highest investor appetite and is the most frequently traded. It has been transacted in all 23 auctions, often experiencing oversubscription. The yield trend of the 364-day bill has consistently increased throughout the year, reaching an all-time high of 7.2% in mid-January.
On the other hand, the 182-day bill has seen its weighted average yield increase while prices drop, showcasing a contrasting trend. The 91-day and 35-day bills have witnessed declining minimum successful bids and weighted average prices throughout the year.
Market Insights: Understanding Transaction Trends and Making Informed Investment Decisions
While individual investors seeking higher yields and long-term growth may find Treasury bills less attractive in the current market, institutional investors still value these instruments for their liquidity benefits. Treasury bills are considered low-risk investments, offering competitive yields when compared to other similarly safe options like bank savings accounts. However, individual investors should carefully evaluate their investment goals and consider alternative investment avenues that align with their objectives.
The analysis highlights the transaction trends of different Treasury bills. The 364-day bill has consistently been the most transacted security, followed by the 182-day bill. The 91-day and 35-day bills have seen fewer transactions in comparison. These trends provide insights into investor preferences and market dynamics.