T-bill yields continue dropping

TIRANA, March 11 – T-bill yields registered another decrease in this week’s auction after the key rate was lowered by another 0.25 percent to a historic low of 2.75 percent in late February 2014. Yields on both 12-month and 6-month T-bills dropped by an average of 0.1 percent this week when government sold 13.8 billion lek (Euro 96.5 billion).
Yields on 12-month T-bills which are the key instrument of government’s internal borrowing, dropped to 3.68 percent, down from 3.77 percent in the previous auction, said the country’s central bank which organizes auctions on behalf of the Albanian government.
Meanwhile, yields on 6-month T-bills dropped to 3.4 percent in this week’s auction, down from 3.52 percent in the previous auction.
Yields on government securities registered a slight increase in early January 2014 despite the key interest rate standing at historic low of 3 percent, unveiling signs of a rising trend in yields as public stands at a staggering 70 percent of the GDP and Standard & Poor’s, one of the top three international agencies, lowered Albania’s long-term sovereign credit ratings to ‘B’ from ‘B+ with a negative outlook.
Yields on 12-month T-bills, which are the key instrument of domestic public debt, dropped to a historic low of 3.62 percent in December 2013, almost half of the record 6.6 percent in January 2013.
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 and lending stands at negative growth rates of 2 percent.
Since September 2011, the Bank of Albania has cut the key interest rate by 2.5 percent to 2.75 percent in several consecutive interventions, but the moves have only been reflected on lower T-bill yields and interest rates for lek-denominated deposits.