Wednesday, 20 July 2016

Treasury bonds undersubscribed

SEVEN-YEAR treasury bonds issued on Wednesday has been undersubscribed as tight liquidity and settling of quarter end local obligations reduced investors’ appetite in the document.
Some of the investors in the instrument are the Commercial banks, pension funds, insurance firms and few microfinance institutions.
Similarly, the local money markets liquidity remained fairly tight, with interest seen for short-term funds from several market players that may have affected investors’ participation in the seven years bond trading.
According to the auction summary, a total of 101.7bn/- was offered for tendering but in the end the instrument fetched 85.64bn/- only. However, the successful amount was 29.62bn/-.
This is the third seven year treasury bond to be auctioned this year all of which ended up undersubscribed. An interest or weighted average yield to maturity slowed to 17.45 per cent compared to 18.16 per cent and 16.23 per cent for the session held in April and January respectively.
Also the Bank would pay investors the weighted average coupon yield of 13.23 per cent compared to14.68 per cent for April and13.48 per cent offered in the session held in January. Proceeds from the bond, would be used to finance long-term infrastructure projects as well as settle some maturing debts.
The minimum successful price/100 was 66.48 compared to 63.51 and 66.11 of the preceding seven years debt instrument. Similarly, the weighted average price for successful bids was 70.79 compared to 68.66 and 74.77 of the previous sessions.
Also the highest bid/100 for the long-term government paper was 72.28 while the lowest bid/100 was 58.26. A total of 85 bids were received and 18 emerged successful.

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