Last week’s over-subscription of the USD75.173 million worth of Treasury Bills issued by Tanzania’s Central Bank was dominated by commercial banks.
Trailed by insurance companies, pension funds and other investors, commercial banks, munched down 92.71 percent of the total bids.
In respective order, they were followed by insurance companies which secured 4.68 percent of the bids. Then came the pool of other investors who pulled in 1.49 per cent of the bids.
Interestingly, pension funds that have of recent years been the big investors across most all sectors trailed the auction reeling in the remaining 1.12 percent of the bids.
Making A Quick Buck: Why Commercial Banks Dominated T-Bills Auction
The answer is simple, commercial banks in Tanzania have been trying their level best to stay afloat in the recently troubled financial waters of the sector.
More accurately, they have been wadding in rather muddy financial swamps dragged back by ever mounting Non-Performing Loans (NPLs).
So bad is the situation that only last month, the Central Bank was forced to issue regulations ordering all banks to develop strategies to reduce NPLs but also requiring them to increase lending.
Since Treasury Bills are government backed, they are a sure investment and the returns are short term meaning a quick pay back.
So it is no surprise that cash hungry commercial banks leaped at the opportunity to make a quick dollar.
The oversubscription was no chump change either, while the Central Bank offered ($75.173 million (Tsh170 billion)
While the Bank of Tanzania issued USD 74.731 million (Tsh169 billion) on the competitive platform, it received bids worth USD 117.31 million (Tsh265.28 billion), an oversubscription of USD 42.58 million (Tsh96.28 billion).
In total, the Bank of Tanzania offered USD 75.173 million (Tsh170 billion) in T-bills, of which USD 74.731 million (Tsh169 billion) went to the competitive window and USD 440,000 (Tsh1 billion) went to the non-competitive arena.
When opened, the auction windows witnessed over whelming subscriptions with the 91-day paper receiving bids worth Tsh10.35 billion ($4.58 million) yet the Treasury only accepted USD 1.32 million (Tsh3 billion).
USD 43.67 million (Tsh98.75 billion) was bid in the 182-day paper but only USD 28.743 million (Tsh65 billion) was accepted.
In fact only the 35-day paper received bids that matched what was offered USD 440,000 (Tsh1 billion).
By the close of the auction, the Central Bank accepted bids worth USD 713 million (Tsh1,612.37 billion) on the competitive window and USD 74.731 million (Tsh169 billion) in face value.