12-month bonds become more profitable - Yield increases in the latest auction, but investor demand remains low
Profits from investing in 12-month treasury bills have marked another increase in the latest auction held by the Ministry of Finance, on August 11. The weighted average yield received reached 2.75%, up from 2.67% in the previous auction in July.
This is the highest interest rate for 12-month bonds since the beginning of the year, continuing the upward trend in yields in recent auctions. However, the interest rate remains close to the Bank of Albania's base rate, which currently stands at 2.50%.
In the August 11 auction, the Ministry of Finance had announced 7.2 billion lek for financing, while the requests submitted by investors amounted to about 6.86 billion lek. Therefore, the request was about 345 million lek lower than the amount the government intended to borrow.
As a result, the Ministry accepted the entire amount requested by investors, about 6.86 billion lek, but failed to secure the entire planned amount. The auction coverage ratio resulted in 0.95, which means that for every 100 lek of bonds offered by the government, investors requested about 95 lek.
The data also shows that the minimum yield required by investors was 2.60%, while the weighted average acceptance yield was set at 2.75%. This indicates that investors sought a somewhat higher return to invest in 12-month bonds, compared to the previous auction.
12-month treasury bills are considered among the safest investment instruments in the domestic market, as they are guaranteed by the state. The yield represents the investor's profit from holding the bond until maturity. In the case of 12-month bonds, this profit is created by the difference between the price the investor pays to purchase the bond and the value he receives at the end of the one-year term.
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