12-month bond yields fall slightly to 3.66%

2024-05-01 08:12:30, Ekonomi CNA

12-month bond yields fell slightly at the last auction in April.

According to the Bank of Albania, the weighted average yield decreased to 3.66%, from 3.69% in the previous two auctions of this month.

The demand in the auctions was presented more improved. From ALL 8 billion that was the amount announced for financing (but of which ALL 4.5 billion were reserved by the Bank of Albania), the total value of the claims reached more than ALL 9.5 billion.

The pro rata or the accepted part of the competitive demands was relatively low, at the level of 26.72%, this is also due to the relatively high amount that was reserved by the Bank of Albania in the auction.

Overall, the month of April confirmed a stable performance of 12-month bond yields. They remain at lower levels compared to last year and with a small margin above the base interest rate.

As the main instrument of domestic borrowing and at the same time the one with the highest frequency of issuance, 12-month bonds are the main benchmark indicator in the financial market, also for lending to the private sector.

The low yields of 12-month bonds therefore mean the preservation of relatively low interest rates in private sector lending. This is resulting in a high increase in lending this year as well.

12-month bond yields fall slightly to 3.66%

For the first quarter of this year, the value of the new loan disbursed reached the value of ALL 82.8 billion, an increase of almost 30% compared to the first quarter of last year.

The main contribution to growth continues to be given by the loan in Lek, which for the first quarter of the year has almost doubled compared to the same period a year ago. The weight of the new loan in lek to the total has reached 62%, from 41% that was a year ago.

The significant drop in inflation during the first quarter of this year seems to have changed the market's expectations for the development of interest rates in the short term. For March, inflation fell to 2.3%, the lowest level in two and a half years.

With inflation falling below the Bank of Albania's target, a further increase in interest rates is no longer expected at the moment. In fact, if inflation continues to decline and the lek continues to strengthen in the exchange rate, in theory the Bank of Albania may consider a rate change, returning to lowering interest rates.

A reduction in the basic interest rate is very likely to be decided in the middle of this year by the European Central Bank, in case inflation will not experience sudden increases. However, in the Eurozone, the pressures for a rapid reduction of interest rates are stronger, also due to the very low rates of economic growth./ Monitor.al