BoT comes up with change in coupon rate determination
What you need to know:
- Previously, coupon rates on government bonds, once set, remained unchanged for multiple auctions over a considerable period.
Dar es Salaam. The Bank of Tanzania yesterday announced a change in the approach to determining coupon rate, effective from January 2025.
Previously, coupon rates on government bonds, once set, remained unchanged for multiple auctions over a considerable period.
According to the BoT governor, Mr Emmanuel Tutuba, such situation was leading to misalignment with the prevailing market conditions.
Under the new approach, the central bank will continue to conduct government securities auctions as per the published Issuance Calendar, but the applicable coupon rate for a particular bond auction will be published on the respective call for tender at least one week before the auction date on the Bank of Tanzania website, newspapers and social media platforms.
“Due to this change, the coupon rate will no longer appear on the Issuance Calendar,” said Mr Tutuba in a statement issued yesterday.
He said that the adjustment aims to align coupon rates with prevailing market conditions, thereby enhancing bond liquidity, improving price discovery, and boosting market efficiency.
“These changes are crucial for the development of Tanzania’s financial markets,” he explained.
He further said that the method of participation in the government bond auctions will remain unchanged.
Investors will continue to participate through Central Depository Participants (CDP), including banks licensed under the Banking and Financial Institutions Act, and dealers licensed under the Capital Markets and Securities Authority Act.
“This change will not affect Treasury bonds issued before January 2025,” he said. The BoT will issue Treasury Bills with maturities of 35, 91, 182, and 364 days, as well as issue and re-open Treasury Bonds with maturities of two years, five years, 10 years, 15 years, 20 years, and 25 years in the next six months.
“The Treasury bills and bonds will be auctioned in the order listed unless otherwise specified,” he stressed.
