T-bill yields continue climbing

TIRANA, June 12 – Twelve-month T-bill yields registered another slight increase in this week’s Bank of Albania auction when they rose by 0.04 percent to 7.38 percent continuing their rising trend despite the central bank having lowered the key interest rate by 1 percent to a record low of 4.25 percent in four consecutive interventions since Sept. 2011. Albania’s central bank auctioned 14.3 billion lek in this week’s auction, of which 9 billion lek in 12-month T-bills. Meanwhile, 6 month T-bill yields also registered a 0.04 percent increase to 6.24 percent.
The low number of competitive offers also influenced on the slight increase of yields as the central bank was forced to accept all bids.
Experts explain the situation with the sharp rise in bad loans, currently at 19 percent, and public debt at the legal limit of around 60 percent of the GDP which is making investors perceive increased risk in investing in government securities.
Although having lowered the key interest rate by 1 percentage point to a historical record low of 4.25 percent since Sept 2011, the Bank of Albania interventions in the monetary policy have not been reflected at all in lowering interest rates for loans in the domestic currency lek, and T-bill yields. 12-month T-bill yields have also been on an upward trend since Dec. 2011 climbing from 6.95 percent to 7.38 percent in June 2012.
The key interest rate cuts have also had a minor impact on boosting lending as bad loans, at a record 20 percent in 2011, have forced banks to considerably tighten lending standards.
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.