The overall cost of loans pegged by commercial banks increased to 16.3 per cent in the year ending November 2013, compared to 15.8 per cent in 2012, largely due to high rates offered for short term debt instruments.
Bank of Tanzania (BoT)
Lending facilities finds it rewarding to invest in risk free treasury bills and bonds that offer premium yields compared to other sectors of the economy like agriculture, trade and manufacturing.
The weighted average yield to maturity for treasury bills has been at an average between 14 per cent to 16 per cent, the rates which have been attractive to most investors. According to the Bank of Tanzania (BoT) monthly economic review for November last year, the one-year lending rate increased to 14.1 per cent in the period under review from 13.7 per cent of the previous month but remained lower than 14.3 per cent recorded in 2012.
The overall time deposit rate declined by 36 basis points to 8.41 from the rate registered in October 2013 but remained higher than 8.32 per cent recorded in the corresponding month November 2012. Similarly, the 12-month deposit rate increased to 11.6 per cent from 11.5 per cent in the preceding month and 10.50 per cent recorded in November 2012.
The spread between 12-month time deposit rate and one year lending rate widened to 2.5 percentage points from 2.19 per centage points registered in October 2013 but lower than 3.83 percentage points registered in the corresponding month in 2012. The period under review saw the BoT offering treasury bills worth 305bn/- compared to 290bn/- traded in the preceding month.
Total demand amounted to 471.3bn/- and the Bank accepted bids worth 350.8bn/-. Overall Weighted Average Yield (WAY) slowed to 14.8 per cent from 15.13 per cent recorded in October 2013. In the Treasury bond market, the Bank offered bonds of 7-year and 15-year maturities worth 49bn/- and 15bn/-, respectively.
It is worth noting that, the 15- year Treasury bond was offered for the first time as one of the government’s initiatives to increase the number of instruments in the capital market while maintaining smooth redemption profile. Both auctions were oversubscribed registering bids worth 88.7bn/- and 36.1bn/- for seven-year and 15 year bonds, respectively.
The Bank accepted bids worth 49bn/- and 15bn/-for the two respective bonds as planned. Way for the 7-year bond decreased to 15.15 per cent from 15.76 per cent recorded in the preceding auction while that of 15-year was 16.65 per cent.
Source Tanzania Daily News