TIRANA, August 13 – With lending striving to remain at positive growth rate and banks seeing government securities as one of their few investment opportunities, T-bill yields continue registering new record lows. In the latest auction organized by the Bank of Albania, 12-month T-bill yields dropped to 4.87 percent, down from 5.11 percent as the central bank admitted only 8 bids among a total of 34 competitive bids most made by commercial banks. Six-month T-bill yields also sharply dropped to 4.52 percent, down from 5.3 percent last July.
The Bank of Albania sold 8.5 billion lek in 12 and 6-month T-bills in the latest auction held on August 13.
Experts explain the declining trend in T-bill yields with more active participation by commercial banks which have turned to investments in government securities due to poor demand for new loans as non-performing loans have reached a record 24.4 percent. The latest cut to the key interest rate to a historic low of 3.5 percent a couple of weeks ago has also had a positive impact.
Albania’s T-bill yields continue registering new record lows, positively reflecting the consecutive cuts to the key interest rates but also influenced by rising investments by commercial banks in government securities as lending strives to remain at positive growth rates. 12-month T-bill yields have dropped to a historic low of 4.87 percent, down from 5.35 percent in the previous auction and 6.35 percent at the beginning of 2013 when the key interest rate was at 4 percent, considerably reducing the cost of Albania’s public debt currently standing at a record 62 percent of the GDP.
In order to participate in T-bill auctions, individuals must open a bank account with a minimum of 300,000 lek (Euro 2,132) in licensed institutions and order them to make the purchases.
The Bank of Albania organizes 3-month and 6-month T-bill auctions every month and 12-Month T-Bill auctions every two weeks. T-bills are issued and guaranteed by the Ministry of Finance on behalf of the Albanian government.
With the key interest rate standing at a historic low of 3.5 percent, the positive impacts of the easy monetary policy the central bank has been following since around two years have mostly been reflected on lower T-bill yields on government’s domestic debt. The situation is also a result of lending striving to maintain positive growth rates and banks investing in government securities as an alternative to low demand for loans.
Interest rates have registered a slight decrease for lek-denominated loans positively reflecting the central bank’s cut to the key interest rate in early 2013 to a historic low of 3.75 percent. Average interest rates for lek-denominated loans in June 2013 loans slightly dropped to 10.73 percent, down from 11.05 percent last May and 11.39 percent in June 2012, according to BoA data.
Meanwhile, average interest rates on Euro-denominated loans slightly rose to 7.08 percent, up from 6.72 percent last May and 7.03 percent in June 2012, ending the positive impacts from the latest move by the European Central Bank which in early May 2013 cut its key interest rate by a quarter point to a record low of 0.5 percent as part of efforts to help dig the Eurozone out of recession.
Interest rates on 12 month lek-denominated deposits slightly dropped to 4.59 percent in June 2013, down from 5.11 percent in May 2013 and 5.5 percent in June 2012. Twelve-month Euro-denominated deposits slightly dropped to 2.27 percent in June 2013, down from 2.40 percent in May 2013 and 3.24 percent in June 2012.
Differently from loans, 63 percent of which are issued in foreign currency, mainly in Euro, the situation with deposits appears more balanced with lek deposits accounting for 52 percent of total deposits.
Lending in the national currency lek has gained around 8 percentage points in the past four years and now accounts for one third of the total credit portfolio compared to only a quarter just before the onset of the global financial crisis in 2008. Data published in the latest BoA supervision report show lending in the national currency climbed to 35.5 percent at the end of 2012, compared to only 27.4 percent at the end of 2008.
BoA to auction 15 million Euro-denominated T-bills
Albania’s central bank has announced a new auction in Euro-denominated 12-month T-bill for August 20 when the Albanian government intends to borrow 15 million euros. In the previous Euro-denominated auction last July the Bank of Albania sold only 9.3 million euros out of an announced Euro 11 million in 12-month T-bills at a 3.9 percent yield. The last time the Bank of Albania auctioned Euro-denominated was in late December 2012 when it sold Euro 20 million in T-bills at a 5 percent yield. Bank of Albania data show this is the ninth auction in which the Bank of Albania is selling Euro-denominated T-bills on behalf of the Albanian government.
