12-month bonds hit bottom/ Average interest rate at 2.6%. Lowest since June 2022
The average interest rate on 12-month Treasury bills has set another record low. In the latest auction, the weighted average yield fell to 2.57%. Thus, the yield is very close to the base interest rate of 2.50%. In the auction held about a month ago, the yield was slightly higher, at 2.6%. This is also the lowest rate recorded since June 2022.
Regarding investor demand, the data shows that it was high. The number of competing requests was 15, while only 10 of them were accepted. On the other hand, the amount announced for financing was 6.8 billion lek, while the total value of requests in the auction reached 8.498 billion lek.
The Bank of Albania's decision to lower the key interest rate to 2.50% from 2.75% previously has its impact on the further decline in the yield of 12-month bonds.
The low interest rate on bonds 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.
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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