Monday, March 31 2014 12:03
Interests on interbank loans and yield on government bonds down following refinancing rate reduction
ArmInfo. Following reduction of the refinancing rate by the Central Bank of Armenia, the interests on the short-term instruments have gradually decreased, according to the fiscal policy program of the Central Bank for Q1 2014. Thus, the average quarterly level of interest rates on interbank loans (overnight) for Q4 2013 fell 0.43pp and for Dec 2013 - 0.66pp to 7.74%.
Meanwhile, in the interbank market the average yield on repo-transactions for Q4 2013 fell 0.56pp to 8.2% in December.
The Finance Ministry's policy for the state debt management has affected reduction of the yield on short- term government bonds. The average yield on short-term (up to 1-year maturity) government bonds fell 0.3pp for Q4 to 8.66% amid 0.83pp decline for December to 8.22%. Reduction of the refinancing rate affected the yield curve of the government bonds. Thus, the yield of government bonds in the secondary market fell along the yield curve affecting the mid-term and long-term government bonds. Yield on the long-term spots fell 4.8pp to 10.9%. The gap between mid-term and long- term yields totaled 2.98pp in December, with a 3,86pp decline for Q4.
The average weighted yield on government bonds in the primary market totaled 9.9% in Dec 2013 versus 13.7% in Dec 2012, including the yield on short-term government bonds fell from 10.2% to 7.9% and the yield on government mid-term bonds from 14.8% to 9.6%. The yield on the long-term bonds fell from 16.3% to 11.6%. According to the Central Bank of Armenia, the average repo-transactions in 2013 totaled 1.034 trillion drams, with the average yield being 9.4%, including inter-bank repo-transactions made up 122.5 billion drams at the average yield of 8.94%. The Central Bank of Armenia (CBA) reduced the refinancing rate from 7.75% to 7.5% on Feb 11. The CB press service told ArmInfo that the decision on the 0.25 pct point reduction was taken during the CBA Council's meeting on Feb 11.
To note, on November 12, 2013, the refinancing rate dropped from 8.5% to 8%. On the same day the deposit rates dropped from 7% to 6.5%, and the lombard repo rates - from 10% to 9.5%. On 12 April 2011 the CB reduced the refinancing rate from 8.5% to 8% and retained it till 13 Aug 2013, when the refinancing rate was raised to 8.5% again. The CB's August decision aimed to curb the inflation expectations and dampen the secondary impact of the growth in energy prices. On 13 Aug 2013 the deposit rates were raised from 6.5% to 7%, and the lombard repo rates were retained at 10% till 12 Nov 2013.
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