Tanzania’s central bank has shifted its focus to issuing longer-term Treasury bonds in a restructured borrowing strategy, contributing to higher yields in recent auctions.
The Bank of Tanzania announced in February plans to reopen 10-year, 15-year, 20-year and 25-year Treasury bonds before the end of the 2023-2024 fiscal year.
Since releasing the new issuance calendar in mid-February, the central bank has held two auctions featuring the longer-term bonds. The calendar includes 10 auctions, with seven offering the 20-year and 25-year tenors. Eight auctions remain until the fiscal year ends.
The restructuring allows the government to tap into higher yields from the longer bonds as it seeks 5.44 trillion Tanzanian shillings ($2.3 billion) in domestic borrowing for the fiscal year’s budget. Historically, Treasury bonds account for about 75% of Tanzania’s domestic debt issuance.
In the two auctions under the new calendar, the central bank raised 523.4 billion shillings ($224 million), nearly double the targeted amount and 27% of this fiscal year’s collections so far.
The auctions attracted subscriptions 2.64 times the offered amount, lifting the overall subscription ratio to 68% from 55% previously. Weighted average yields rose by at least 200 basis points from previously issued bonds in the same tenors.
Investors secured up to 17% yields in the latest 25-year bond auction on March 6.
The next Treasury auction is set for March 20, when Tanzania will reopen a 20-year bond first issued in February 2019 with a 15.49% coupon rate.
