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What are the basics of investing in Tanzanian Treasury Bonds?
 

 

In previous years bonds were pretty much something only corporations and very wealthy Tanzanians could afford.  This is because the minimum value to be auctioned was Tshs.50 million. 

However in recent years things have changed in order to encourage more citizens to participate in investing in bonds.

 

What are Treasury bonds?

  • Simply put a bond is a loan the government obtains from the general public.

  • A bond is a certificate of debt issued by a government or corporation guaranteeing payment of the original investment plus interest by a specified future date, according to the American Heritage dictionary.

  • One of the advantages of investing in bonds is that you can be assured not to loose the money invested because it is highly unlikely for the government to default on the loan.

 

Fast facts

  • Eligibility is only for Tanzanian residents

  • They can be held for either 2 or 5 years

  • Interest payments are made semi-annually, the rate is fixed and announced before each issuance

  • Minimum bid size is Tshs. 1 million if bidding through primary dealers

  • The bonds will be listed at the Dar es Salaam Stock Exchange

  • On maturity the treasury bonds can be redeemed through primary dealers or directly at BoT

 

Advantages of investing in treasury bonds

  • Bond investors are assured of getting their money back unlike stocks/company shares

  • They can be pledged as collateral

  • They are negotiable and transferable

  • Treasury bonds is a good way to set aside funds for retirement or education for children, the longer the period to maturity

 

How are treasury bonds traded?

  • During the initial issue investors are invited to submit bids using tender forms through primary dealers or directly through the Bank of Tanzania (BoT)

  • Bid forms can be obtained from the BoT head office, BoT branches and primary dealers.

  • Successful bidders have to pay their bids within one day after notification of the auction results

  • After the primary auction, treasury bonds can only be traded at the Dar es Salaam stock exchange in multiples of Tshs. 100,000

 

For more information on how to buy or sell treasury bonds visit the Bank of Tanzania website and the Dar es Salaam Stock Exchange website.