National Bank of Malawi (NBM) Capital says the ongoing oversubscription of Treasury Bills is indicating that there is little investment room on the money market or lack of innovation by players.
In its market review report, NBM Capital noted that the primary TB auction continues to register oversubscription; with the June 25, 2013 auction recording a 3.47 times oversubscription as K5.2 billion was attracted against a target of K1.85 billion.
“We see oversubscription to have persisted and is probably in the long tenors as investors wish to lock up their funds in such an investment instrument amid a downward trend in inflation as in TB yields. Furthermore, previous auctions had registered staggering rejection levels with an average of about 50 percent left out in the market,”
The company which specializes in financial markets further said unfortunately, the applications continue to overflow the auction and this raises a question as to whether the market has limited investment
room or the players lack innovative mind to create enough for secondary trading of treasury bills.
“We envisage that in either way, the authorities will be at liberty to dictate terms and direction of the financial system as it seems it is the only ready channel for investors to warehouse their liquidity – there shall be a “take or leave it” allotment policy,” said NBM.
But Alliance Capital said the scramble for treasury bills is a good development as there will be no crowding out effect hence funds will be left for private sector investment and spending.
“The primary Treasury bill market recorded an oversubscription of 83 percent against an announced amount of K 1.8 billion. It is pleasing to note that recently there has been reduced borrowing by the monitory authorities.
“This is a good development as there will be no crowding out effect hence funds will be left for private sector investment and spending. All the tenors recorded marginal drop in yield,” Alliance Capital said.
The company said the over-subscription is a sign that investors run for cover in the wake for unpredictable deposit rates in the money market.