T-bill yields register new record low of 5.35%

TIRANA, July 9 – 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. In the latest Bank of Albania auction, 12-month T-bill yields dropped to a historic low of 5.35 percent, down from 5.52 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.
Meanwhile, 6-month T-bills yields dropped to 5.3 percent down from 5.51 percent in the previous auction.
The Bank of Albania auctioned a record 24.4 billion lek in the latest auction held on July 9.
Twelve-month treasury bills accounted for around 41 percent or 206 billion lek of Albania’s total domestic debt at the end of the first quarter of 2013, according to Finance Ministry data. Yields on 12-month T-bills have been on a downward trend since March 2012, when they were at a record 7.5 percent.
With the key interest rate standing at a historic low of 3.75 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.
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.
Bank of Albania data show Raiffeisen Bank, the country’s biggest bank, lowered its exposure to Albania’s public debt by 4.77 percent to 29.43 percent of the total debt stock at the end of 2012. Back in 2008, just before the onset of the global crisis, Raiffeisen possessed around 37 percent of the domestic debt.
However, Raiffeisen’s withdrawal has been compensated by other commercial banks which have increased their share to 37.52 percent of total public debt , up from 34.85 percent at the end of 2011. The Bank of Albania share has also slightly dropped to 12.48 percent, down from 14.3 percent at the end of 2011.
Meanwhile, individuals and non-banking financial institutions have increased their shares to 14.48 percent and 6.09 percent, up from 12.92 and 3.73 percent respectively at the end of 2011.
Although having lowered the key interest rate by 1.5 percentage point to a historical record low of 3.75 percent since Sept 2011, the Bank of Albania interventions in the monetary policy have been poorly reflected in lowering and T-bill yields and interest rates for loans in the domestic currency lek.