The Term Structure and Treasury Bill Market Efficiency in Tanzania: The Term Structure of Interest Rates and the Efficiency of the Primary Market of Treasury Bills in Tanzania

There is an increasing trend of the conduct of monetary policy in developing countries to mirror, at least on paper, those in developed economies. The structures in the former economies are not only different but they are also weak in some areas. One aspect that came with the liberalization of the financial markets in Tanzania was changing the trading of Treasury securities in the primary market to the auction system which uses discriminatory prices, rather than a single uniform price, in allocating securities to bidders. This, however, was not coupled with development of an organized secondary market for the Treasury securities. Consequently, the resulting yield curve and the efficiency of this market may be expected to be different from where secondary markets are well developed. This work provides an initial assessment of the Treasury bill auction system in Tanzania and the efficiency of the primary market. It forms a basis for understanding the term structure of interest rates in Tanzania and analyzing the yield curve and the integrity of the auction process.

Ellinami J MINJA is a Lecturer in Finance and Economics at the University of Dar es Salaam, Tanzania. He holds a Ph.D. in Economics from Oklahoma State University and also a Certified Public Accountant (CPA). He has taught at university level since 1991 in a number of universities holding both academic and administrative positions.