Oversubscribed T-Bills, Strong Bond Demand, and Rising Interbank Turnover (Sept 2025)
In September 2025, Tanzania’s financial markets displayed strong liquidity and investor confidence, reflected in an oversubscribed T-bill auction (TZS 194.7 billion bids against TZS 80.7 billion tender) and a decline in average yields to 6.03% from 6.83% the previous month. Bond market activity remained solid, with long-term tenors (20- and 25-year) attracting substantial investor interest, contributing to total bids of TZS 2,271.5 billion, of which TZS 784.9 billion were accepted, and yields stabilizing between 12.48% and 13.55%. Meanwhile, the interbank cash market strengthened markedly, with transactions rising to TZS 3,261.6 billion from TZS 2,374.5 billion—an increase of TZS 887.1 billion—driven by higher commercial banking activity, stable liquidity conditions, and sustained export inflows. Interbank rates remained stable at 6.45%, comfortably within the 3.75–7.75% policy corridor, supported by the Bank of Tanzania’s active liquidity management through reverse repos. Collectively, these developments indicate a resilient and well-functioning financial ecosystem, where strong liquidity supports monetary policy transmission, reduces financing pressures, and deepens market confidence.
1. Government Securities Market
Government securities include Treasury bills (T-bills) and Treasury bonds (T-bonds). They are used for financing government operations and managing liquidity.
Key Highlights
One Treasury bill auction was conducted in September 2025.
Tender size: TZS 80.7 billion
Bids received: TZS 194.7 billion
Successful bids: TZS 80.7 billion
Oversubscription reflects high liquidity in the market.
Weighted average yield decreased to 6.03% (from 6.83% in August 2025)
Bond Market
The BOT conducted auctions for:
5-year bond — Tender TZS 136.2 billion — undersubscribed
20-year bond — Tender TZS 271.1 billion — oversubscribed
25-year bond — Tender TZS 293.7 billion — oversubscribed
Accepted Bids and Yields
Total bids received: TZS 2,271.5 billion
Total accepted: TZS 784.9 billion
Weighted Average Yields:
5-year: 12.48%
20-year: 13.55%
25-year: 13.19%
Summary Table — Government Securities Market (September 2025)
Item
Value
T-bill tender size
TZS 80.7 billion
Total bids (T-bills)
TZS 194.7 billion
Accepted bids
TZS 80.7 billion
Average T-bill yield
6.03%
T-bond total bids
TZS 2,271.5 billion
T-bond accepted bids
TZS 784.9 billion
5-year yield
12.48%
20-year yield
13.55%
25-year yield
13.19%
2. Interbank Cash Market (IBCM)
The IBCM allows banks to borrow and lend liquidity—crucial for monetary policy transmission.
Key Highlights
Total IBCM transactions in September 2025:
TZS 3,261.6 billion
Up from TZS 2,374.5 billion in August 2025
7-day transactions had the largest share (64.6% of total)
Rates remained stable due to adequate liquidity:
Overall IBCM rate: 6.45%
Previous month: 6.48%
Liquidity Dynamics
Overnight rate and 7-day market rate stayed within the policy band (3.75%–7.75%).
BOT used reverse repo operations to stabilize liquidity.
Implications of Financial Markets Developments in September 2025
The data on Tanzania's government securities and interbank cash markets (IBCM) for September 2025, extracted from Financial Markets of the Bank of Tanzania's (BOT) Monthly Economic Review (October 2025), signals a liquid and confident financial system. This aligns with broader economic resilience: 6.3% Q2 GDP growth, stable 3.4% inflation, accommodative monetary policy (CBR 5.75%; Section 2.3), shilling appreciation (9.4% y/y; Section 2.5 IFEM), and a manageable fiscal deficit (TZS 618.5B financed partly via securities; Section 2.6). T-bill oversubscription (194.7B bids vs. 80.7B tender) and declining yields (6.03%) reflect surplus liquidity, while long-term bond demand (oversubscription for 20/25-year tenors) indicates investor optimism. IBCM turnover surged 37.4% MoM to TZS 3,261.6B, with rates steady at 6.45% within the 3.75–7.75% corridor, underscoring effective liquidity management amid export inflows (gold/crops/tourism). Below, I outline implications, categorized by market and linkages.
1. Government Securities Market: Investor Confidence and Liquidity Absorption
T-Bills: Oversubscription and Yield Compression (6.03% from 6.83%): The 2.4x bid-to-cover ratio (TZS 194.7B bids for TZS 80.7B) highlights abundant short-term funds from banks and institutions, driven by private credit expansion (16.1% y/y) and fiscal needs (domestic debt TZS 37,459B, up 0.9%). Lower yields signal easing funding costs for government, reducing pressure on the deficit (financed via these instruments).
T-Bonds: Selective Demand with Stable Yields (12.48–13.55%): Undersubscription in 5-year (TZS 136.2B tender) contrasts with oversubscription in longer tenors (20-year TZS 271.1B, 25-year TZS 293.7B; total accepted TZS 784.9B from TZS 2,271.5B bids), pointing to preference for duration amid low inflation expectations (core 2.2%). Yields held firm, reflecting risk premiums for longer horizons but attractiveness vs. inflation (real yields ~9–10%).
Broader Implications:
Positive: Oversubscription eases borrowing (supports 71.9% expenditure execution) without crowding out private lending (rates at 15.18%; prior analysis). Signals macroeconomic trust, boosted by shilling strength (lowers external debt service) and global stability (IMF 3.2% growth).
Risks: Short-term yield drop could flatten the curve, signaling potential liquidity overhang if not mopped up (via reverse repos). Undersubscription in shorter bonds may indicate caution on near-term fiscal risks (e.g., revenue shortfalls from mining taxes).
2. Interbank Cash Market (IBCM): Enhanced Transmission and Activity
Turnover Surge (+37.4% to TZS 3,261.6B; 64.6% 7-Day Share): Rise from August's TZS 2,374.5B reflects heightened banking operations, fueled by export FX conversions (e.g., gold inflows) and credit demand (M3 +20.8% y/y). 7-day dominance indicates preference for short-term balancing amid stable policy.
Rate Stability (6.45% from 6.48%, Within Corridor): Anchored by BOT's reverse repo fine-tuning (absorbing surpluses), this supports monetary transmission, keeping lending viable without volatility.
Broader Implications:
Positive: Boosts financial deepening, aiding growth sectors (agriculture/mining contributions 1.8%/1.5% to GDP; Chart 2.1b). Stable rates reinforce low inflation (food eased to 7.0% via NFRA stocks) and shilling (BOT USD 11M intervention).
Risks: Over-reliance on short tenors could amplify shocks if liquidity tightens (e.g., from global tightening). Higher activity may strain smaller banks if not matched by capital buffers.
3. Interlinkages: Liquidity Supporting Growth and Stability
Policy Effectiveness: Declining T-bill yields and stable IBCM rates align with CBR (5.75%), enhancing transmission to real economy (e.g., easing short-term borrowing for exporters). This complements fiscal financing (securities absorbed TZS 618.5B deficit) and debt sustainability (40.1% debt/GDP).
Investor and Sector Ties: Long-bond demand from pensions/insurers (institutional inflows) reflects confidence in 6% growth projection, while IBCM surge ties to external strength (CA surplus USD 1.2B Q2). In Zanzibar, similar liquidity likely aids tourism financing.
Broader Implications:
Positive: Fosters efficient intermediation (spread ~5.7 pp; prior analysis), positive real rates (vs. 3.4% inflation), and resilience to commodities (oil down aiding energy inflation 3.7%). Supports EAC/SADC convergence.
Risks: Excess liquidity risks asset bubbles if credit overheats; global uncertainties (trade policy index up) could reverse yields. Monitor for spillover to inflation if unabsorbed.
4. Macroeconomic Context from the Review
Synergies: These markets underpin monetary-fiscal coordination, with securities funding development spend (TZS 1,273B) and IBCM enabling 29.0% M1 growth. Projections: Stable yields, liquidity to sustain 6% GDP and 3–5% inflation.
Outlook: Continued oversubscription likely if exports hold; BOT may adjust repos to prevent easing bias.
High confidence; yield drop (6.03%) eases govt costs.
Bond Bids/Accepted
TZS 2,271.5B / 784.9B
Mixed (long oversubscribed)
Institutional demand for duration; stable yields (12–13%).
IBCM
Total Turnover
TZS 3,261.6B
+37.4% (from 2,374.5B)
Reflects credit/export activity; aids policy transmission.
7-Day Share
64.6%
—
Preference for short-term; stable rates (6.45%) curb volatility.
Overall Rate
6.45%
-0.03 pp
Within corridor; supports low inflation/growth.
In summary, September 2025's financial market dynamics imply a robust, liquid ecosystem that reinforces Tanzania's stability and growth enablers. Oversubscription and turnover growth signal trust and efficiency, mitigating fiscal pressures while amplifying monetary impact—key for navigating global risks into late 2025.
Commodity prices are projected to stabilize after the volatility caused by the COVID-19 pandemic and the war in Ukraine, though they will remain at historically high levels. In 2024, oil prices are forecast to rise to $84 per barrel, up from $82.6 in 2023, but will gradually decline to $78.1 per barrel by 2026. Non-energy commodities, including metals and agricultural products, are expected to see modest declines, with the non-energy index slightly decreasing to 110.1 in 2024. However, risks such as geopolitical tensions, climate change, and trade disruptions could still affect price trends globally.
1. Overview of Commodity Prices
Commodity prices have stabilized after the sharp fluctuations seen during the COVID-19 pandemic and the war in Ukraine. Prices for both energy and non-energy commodities are expected to remain at historically high levels but will show modest declines over the forecast horizon.
Aggregate commodity prices are expected to decline in 2024, though fluctuations in specific sectors (like energy and food) will continue to drive inflation and impact global trade.
2. Energy Prices
Oil prices are expected to remain elevated due to tight supply-demand balances, geopolitical tensions, and production cuts by major oil-producing countries.
In 2024, oil prices (Brent crude) are forecast to average $84 per barrel, slightly higher than the $82.6 per barrel in 2023.
Prices are projected to ease to $79 per barrel by 2025 and $78.1 per barrel in 2026.
Natural gas prices and coal prices are expected to remain lower in 2024 compared to the peaks seen during the energy crises of 2022-2023.
Energy index: The index, which tracks overall energy prices, is expected to decline modestly in 2024 by 0.6%, reflecting decreases in coal and natural gas prices.
Energy index: In 2024, the World Bank's energy index is projected to drop to 104.0, down from 106.9 in 2023.
3. Non-Energy Commodities
Metals prices are expected to remain stable, with demand pressures balancing out due to increased investment in green technologies (e.g., electric vehicles and renewable energy infrastructure).
Prices for metals are forecast to stabilize, driven by the demand for metals-intensive green energy projects, offsetting reduced demand from China’s real estate sector.
Agricultural prices are expected to decline modestly due to well-supplied global markets, particularly for food crops like grains and edible oils.
Grain prices are projected to decline slightly, supported by improved harvests and less volatile global supply chains.
4. Food and Agricultural Commodities
Food prices: Although still elevated, global food prices are expected to stabilize and decline slightly over the forecast horizon. The non-energy commodity index is expected to see a modest decrease of 0.2% in 2024.
Food prices: High food prices driven by supply disruptions in previous years are expected to stabilize in 2024, reflecting better weather conditions and fewer disruptions in global supply chains.
Non-energy index: This index, which includes agricultural and metals prices, is projected to decline slightly in 2024 to 110.1, down from 110.2 in 2023, showing little movement overall.
5. Risks to Commodity Prices
Geopolitical tensions: Continued geopolitical tensions, particularly in regions rich in energy resources like the Middle East, could drive up oil prices unexpectedly, leading to higher inflation globally.
Climate-related disruptions: Extreme weather events could impact food production, leading to sudden price spikes for agricultural commodities, especially food crops.
Trade fragmentation: Growing protectionism and trade barriers could lead to supply chain disruptions, particularly in energy and agricultural markets, pushing prices higher.
6. Long-Term Projections
While oil prices are expected to decline gradually to $78.1 per barrel by 2026, non-energy commodities (particularly metals) will maintain stable demand driven by the ongoing energy transition.
Agricultural prices will continue to be influenced by climate risks and global demand but are expected to trend downward as global supply stabilizes.
Key Figures:
Oil prices:
$84 per barrel in 2024, slightly up from $82.6 per barrel in 2023.
Gradual decline to $79 per barrel in 2025 and $78.1 per barrel in 2026(GEP-June-2024).
Non-energy index:
Expected to decrease slightly to 110.1 in 2024 from 110.2 in 2023(GEP-June-2024).
Energy index:
Forecast to decrease slightly from 106.9 in 2023 to 104.0 in 2024(GEP-June-2024).
Summary of Commodity Price Outlook:
Oil prices will remain elevated but are expected to gradually decline after 2024.
Non-energy commodities like metals and agricultural products are projected to remain relatively stable, with some modest declines due to improved global supply and the energy transition.
Risks from geopolitical events, climate change, and trade barriers could still cause volatility in key commodity markets.
Source: Global Economic Prospects June 2024 report
