Treasury Bonds and Bills in Tanzania: A Beginner's Guide

When the Government of Tanzania needs to borrow, it sells securities through auctions run by the Bank of Tanzania (BoT). Anyone who buys them is lending money to the Government in return for interest. There are two kinds: Treasury bills for the short term and Treasury bonds for the long term. This guide explains what each one is, how they differ, who they suit and how to take part.

What is a Treasury bill?

A Treasury bill is a short-term loan to the Government. Bills are offered for 35, 91, 182 and 364 days. They pay no interest along the way. Instead, you buy a bill for less than its face value and receive the full face value when it matures. The difference is your return.

Example of how it works: you bid for bills with a face value of TZS 1,000,000. If the auction price is 94 per 100, you pay TZS 940,000 now and receive TZS 1,000,000 on the maturity date. The TZS 60,000 difference is your interest, before any tax.

The price follows from the yield: price per 100 = 100 ÷ (1 + yield × days ÷ 365). This is the convention that reproduces the prices BoT publishes, and the one our Start investing guide uses.

What is a Treasury bond?

A Treasury bond is a long-term loan to the Government, usually from 2 to 25 years (for example 2, 5, 10, 15, 20 and 25 years). A bond has a fixed coupon: the interest rate printed on it, paid twice a year on set dates until it matures. At maturity you get back the face value.

Example of how it works: a bond with a 12% coupon and a face value of TZS 10,000,000 pays TZS 600,000 every six months (12% ÷ 2), before any tax, and returns the TZS 10,000,000 at maturity.

Bonds are often reopened: the same bond (same number, coupon and maturity) is offered again at later auctions. That is why one bond can appear several times in our auction results.

Coupon and yield are not the same

The coupon is fixed for the life of the bond. The yield is the return the market asks for at a particular auction, and it moves from one auction to the next. When the yield is above the coupon, the bond sells below its face value (below 100); when it is below the coupon, it sells above 100. Your actual return depends on the price you pay, not only on the coupon.

Bills and bonds side by side

• Length: bills last 35 to 364 days; bonds last years (2 to 25).

• How you earn: bills are bought at a discount and repaid at face value; bonds pay a coupon twice a year and repay the face value at maturity.

• Minimum amount: the latest bill notice sets TZS 500,000, in steps of TZS 10,000; the latest bond notice sets TZS 1,000,000, in steps of TZS 100,000.

• Selling early: bonds are listed on the Dar es Salaam Stock Exchange (DSE) and can be sold to other investors before maturity; bills are usually held to maturity.

• Tax: each auction notice states the withholding tax. The latest bill notice states 10%; the latest bond notice (bond No. 722) states that bond is exempt. Always check the notice for the security you are buying.

• Price risk: a long bond's market price moves more when interest rates change, which matters if you sell before maturity.

Who are they for?

• Treasury bills suit money you will need within a year: an emergency fund, school fees, a planned purchase, or cash a business or SACCO wants to keep safe for a few months.

• Treasury bonds suit long-term goals that benefit from a steady income: retirement, regular income for a family, or a SACCO or institution planning years ahead.

• Many investors use both: bills for money they need soon, bonds for the long term.

Both are backed by the Government of Tanzania. According to the notices, all investors, including foreign nationals, are eligible to take part.

How to get started

1. Open a CDS account. Government securities are held electronically. You open a Central Depository System (CDS) account through an authorised Central Depository Participant (CDP), such as a licensed stockbroker or a participating bank.

2. Choose what to buy. Decide between bills and bonds, then the tenor or the bond, from the upcoming auctions on our auction calendar.

3. Check the notice. Each auction has a BoT notice with the minimum bid, steps, dates and tax. We link to it on every auction.

4. Place your bid through your CDP. Bids are submitted online through CDPs and close at 11:00 a.m. on the auction date. You can bid at a price or yield you choose (competitive) or accept the auction's average result (non-competitive), as the notice allows.

5. See the result. Results are published on BoT's website right after the auction, and on UCHUMIKA as soon as they appear. If your bid is accepted, you pay on the settlement date and the securities are added to your CDS account.

6. Collect your returns. Bond coupons arrive twice a year; bills and bonds pay back the face value at maturity.

Our step-by-step Start investing guide walks through these steps with the current minimums and an estimate of what you would pay and earn. For bonds, the calculator shows the coupon income for any amount.

Reading the auction results

• Weighted average yield: the average return across accepted bids; it shows where the market priced the security.

• Bid-to-cover: how many times the amount offered investors asked for. Above 1 means demand was higher than the amount on offer.

• Amount offered, tendered and accepted: what the Government wanted to borrow, how much investors bid, and how much was taken.

You can follow these figures over time on our yield trends, Treasury bonds and Treasury bills pages.

Before you invest

This guide is for education only and is not investment advice. Figures in the examples are illustrations, not current rates. Confirm the terms in the official Bank of Tanzania notice and speak to a licensed adviser before you invest.

Sources: Bank of Tanzania tender notices for bond No. 722 and Treasury bills auction No. 1208, and BoT auction results.