12-month bonds, yield falling again - Average interest rate dropped to 2.6% in the last auction
The average interest rate on 12-month treasury bills continues to decline. In the last auction, the weighted average yield fell to 2.6%. Thus, the yield is very close to the base interest rate of 2.50%. In the auction held two weeks ago, the yield was slightly higher, at 2.62%.
Regarding investor demand, the data shows that it was high. In other words, their demand for participation was greater than the amount announced for financing.
Specifically, the amount announced for financing was 6.8 billion lek, while the total value of the requests in the auction reached 8.8 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 12-month bond yield, being the lowest since 2022.
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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