12-month bonds in “free fall” - Weighted average yield reaches 2.54%. High interest from investors
The average interest rate on 12-month treasury bills has registered a decline. In the last auction, the weighted average yield fell to 2.54%, approaching the base interest rate of 2.50%. In the auction held about a month ago, the weighted average yield was 2.57%.
Regarding investor demand, the data shows that it was high. The number of competing requests was 17, while only 11 of them were accepted. Meanwhile, from the 7.8 billion lek that was the amount announced for financing, the total demand was 14.448 billion lek, almost twice as high. In this way, the amount of financing received increased to 8.970 billion lek.
The Bank of Albania's decision on July 9 of this year to lower the key interest rate to 2.50% from the previous 2.75% has had an impact on the further decline in the yield of 12-month bonds.
The low level of bond yields also means cheaper costs for loans in lek, which affects the expansion of bank lending. On the other hand, the government can finance domestic debt at a cheaper cost.
Referring to the Ministry of Finance's borrowing calendar, in the last quarter of this year, i.e. October-December, 64.9 billion lek are scheduled to be financed in the domestic market.
Yield is the annual interest that the bondholder will receive over its term to maturity. The yield on a 12-month Treasury bond refers to the return that an investor realizes from an investment in such an instrument. The yield matches the coupon rate of the bond when it is issued, although the yield often changes while the bonds are outstanding. The current yield is the bond's coupon rate divided by its market price.
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