15-year bond yields fall to 18-month low

2024-08-26 10:25:00, Ekonomi CNA

The 15-year bond yield fell further at this week's auction.

According to information from the Bank of Albania, the uniform yield accepted in the reopening of the 15-year bond auction decreased to 6.98%, from 7.45% in the previous auction in May and from 7.94% that had been in the initial auction of the same issue. , which took place in February.

Out of the 2 billion ALL that was the amount announced by the Ministry of Finance, the submitted amount of requests in the auction reached more than 3 billion ALL.

The Ministry of Finance decided to increase the amount of the issue by about 9% (from 15%, which is the limit allowed by the auction regulation) to 2.18 billion ALL. If the amount of bids received had not increased, the yield would have been even lower.

The regulation of bond auctions stipulates that the yield for all accepted requests shall be uniform with the yield of the highest accepted request.

The 15-year bond yield has already fallen to its lowest level since February 2023.

The further decline in 15-year bond yields confirms a downward trend in government bond yields this year. This decrease was further fueled by the reduction of the basic interest rate by the Bank of Albania at the beginning of July.

With the drop in inflation close to the level of 2%, the inflationary worries have already softened considerably. Contrary to what was expected until the end of 2023, the further increase of interest rates for the lek was avoided.

Now, for the Bank of Albania, as for the European Central Bank, the dilemma is whether the reduction of interest rates should continue this year.

Such an environment, interwoven with low risk premiums and a good liquidity situation in the Albanian financial market, is bringing a decrease in government debt yields.

However, the long-term bonds of the Albanian government, however, continue to offer quite satisfactory returns in relation to the investment risk.

In fact, the internal market of the Albanian government's debt papers is also attracting investors from abroad. According to the Bank of Albania, the portfolio of non-resident investors at the end of the 6th month of 2024 reached the value of about 6 billion ALL.

The participation of non-resident investors during the second quarter of 2024 covered about 18% of the addition of government debt.

Sources from the financial sector say that in recent years, foreign investors are showing a growing interest in the government securities market in Albania.

These titles have very attractive returns, in relation to the titles of the most developed countries, so they are being seen as an alternative to diversify investment portfolios.

A high interest of investors in the bonds of the Albanian government has also been observed in the emission of Eurobonds, during the last years.

This interest, now, seems to be extending to the securities issued in the domestic market, in the national currency Lek./Monitor