Yields of 1-year T-Bills reach 9.2%

TIRANA, Tuesday 17ؙields for 1-year T-Bills reached 9.2% this week, 1% higher than the beginning of 2009. The increase in T-Bills yields is attributed to the government’s high demand in order to finance its budget. Such an immense appetite is exhausting the liquidity supply of the banks therefore reflecting high interest rates.
Such a situation may reserve heavy consequences for the Albanians and the financial means of the economy in general.
First, not only is the government borrowing in huge amounts, it is also borrowing expensively. That in itself is a growing burden for years to come in public debt interest payments.
Second, the increase in 1-year T-Bills yield makes bank loans more expensive for businesses and individuals. 1-year T-Bills interest rates are used as a base reference for interest rates in the banking system (usually adding 1% to the T-Bill interest). The high borrowing from the government is undermining attempts (such as lowering base interest in January by 0.5%) from the BoA to boost loaning to business from 2nd tier banks.
Interestingly enough, higher T-Bill rates make for a good opportunity to invest in governmental debt instruments. Current rates are much higher than the 7% average offered by banks for deposits. However, this remains a theoretical opportunity as banks are still the biggest clients of T-Bills covering more than 90% of the government’s public debt. This is a good thing, ironically, for if businesses and individuals would run to buy T-Bills and government obligations then banks would run out of their deposits, they are so precious to them and to the liquidity of our economy.