TIRANA, Feb. 4 – With the key interest rate at historic low of 1.75 since early Nov. 2015, yields on government securities are also hitting record lows positively reflecting the central bank’s easier monetary policy and reducing the cost of domestic debt.
Yields on 12-month treasury bills hit a historic low of 2 percent in the latest auction held last week, down from 2.21 percent last December, 2.83 percent in late October and an average of 3.5 percent in early 2015.
Yields on 12-month T-bills have more than halved in the past three years, dropping from 6.6 percent in early 2013 to 3.83 percent in January 2014 and 3.59 percent in the latest auction. The cut has considerably reduced the cost of government’s internal borrowing, with 12-month T-bill being the key instrument. Yields on 3-month and 6-month treasury bills have also registered significant declines.
Finance ministry data shows Albania paid 35.6 billion lek (€253 million) in interest rates in the first 11 months of 2015, down 3.8 percent compared to the same period last year despite public debt climbing to a historic high of 73 percent of the GDP.
Experts explain the declining trend in T-bill yields with the consecutive cuts to the key rate and more active participation by commercial banks which have turned to investments in government securities due to poor demand for new loans and tight lending standards as non-performing loans have reached a record 23 percent.
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.
