Tanzania: Why 25-year bond is a boon for institutional investors

The 25-year bond will be a boon to institutional investors such as pension funds, corporations and banks in the financial market, analysts have said.

The Bank of Tanzania (BoT) - which issues government securities with different maturities - is planning to auction the 25-year bond for the first time tomorrow.

Analysts say predictions for investor-appetite can be inexact, since it will be the first time for the bond to be issued in Tanzania.

However, they hold a positive sentiment considering a huge appetite that has been shown to other long-term assets.

Speaking to The Citizen, Zan Securities chief executive officer Raphael Masumbuko said since the government is seen as a risk-free borrower, and locking in a long-term guarantee return, it may prove attractive for institutional investors in the country.

“Generally, we expect good participation from both retail investors and institutions though more participation is expected from the country’s big entities,” he said. However, he said some of the retail investors have already shown interest.

The director of Arch Financial and Investment Advisory Limited, Mr Mazengo Kasilati, shared similar sentiments, noting that it was uncertain to have a correct prediction on the auction outcome, noting however that a positive appetite from investors was being expected.

“The long term security would provide opportunity for big institutions in the country such as banks and social security funds to invest and raise funds, and also to some of the retail investors,” he said.

Announcing the 25-year bond recently, the BoT stated it was a continuation of government efforts to lengthen the maturity profile of domestic debt.