T-bill yields, loan interest rates slightly increase

TIRANA, Jan. 8 – A record auction of 27 billion lek (Euro 190 million) in government securities slightly increased T-bill yields in the beginning of this year. The small number of competitive bids also affected the increase in T-bill yields which had been on a continuous downward trend. In an auction held on January 8, 12-month T-bill yields slightly rose to 6.6 percent, up from 6.35 percent previously. Meanwhile, 6-month T-bill yields also rose to 6.08 percent, up from 5.65 percent previously. Government auctioned 10.9 billion lek in 12-month T-bills and 16.5 billion in 6-month T-bills.
T-bill yields had been on a downward trend positively reflecting the consecutive cuts in the key interest rate by 1.25 percent to 4 percent the central bank has made since Sept. 2011. Central bank data show 12-month T-bill yields dropped to an average of 6.35 percent in the latest December 24 auction, down from 6.38 percent in the previous auction and a record 7.5 percent last March, registering the lowest rates for 2012. The cut in the key interest rate has also been positively reflected on interest rates on lek-denominated loans.
Average interest rates on lek-denominated loans climbed to 10.21 percent in November 2012, up from 9.11 percent in the previous month and 12.17 percent in November 2011. Since Sept. 2011 the Bank of Albania has lowered the key interest rate by 1.25 percent to 4 percent over this one-year period but until recently the moves had been poorly reflected in lowering interested rates in lek-denominated loans or T-bill yields. Average interest rates on Euro-denominated loans dropped to 7.3 percent in November 2012, down from 7.38 percent last October and 7.21 percent in November 2011.
Interest rates on 12-month lek-denominated deposits dropped to 5.25 percent in November 2012, down from an average of 5.85 percent a year ago.
However, the reduction in loan interest rates have been unable to increase lending which rose by only 4 percent during the first ten months of this year.