English, Article edition: HIGH AND VOLATILE TREASURY YIELDS IN TANZANIA: THE ROLE OF STRATEGIC BIDDING AND AUCTION MICROSTRUCTURE Sm ali Abbas; Yuri v. Sobolev

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Physical Description
  • article
Language
  • English

Edition details

Title
  • HIGH AND VOLATILE TREASURY YIELDS IN TANZANIA: THE ROLE OF STRATEGIC BIDDING AND AUCTION MICROSTRUCTURE
Author
  • Sm ali Abbas
  • Yuri v. Sobolev
Physical Description
  • article
Notes
  • The observed increase in the level and volatility of Tanzania's Treasury yields in recent years against an otherwise benign macroeconomic backdrop presented a puzzle for policymakers, while raising concerns about the fiscal burden of rising debt interest payments and diversion of bank credit away from the private sector. Using evidence from bid-level data, and supported by a simple theorising of bidder incentives under unorthodox issuance practices, this paper traces the recent volatility in yields to the emergence of a sharp segmentation of the T-bill market between sophisticated financial market players (foreign-controlled banks) and a less-experienced group of investors (domestic pension funds and small banks). An important policy recommendation that emerges is that public debt managers should avoid micro-managing Treasury bill auctions by issuing amounts in excess of those offered or by dipping into oversubscribed segments of the yield curve, as such practices seriously disadvantage the less-sophisticated (but more competitive) investors vis-à-vis the more sophisticated players. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 Economic Society of South Africa.
  • RePEc:bla:sajeco:v:77:y:2009:i:2:p:257-281
Language
  • English
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