Armenian Finance Ministry upgrades  liquidity level of state bonds

ArmInfo. The Armenian Ministry of Finance has taken several decisions to upgrade  the liquidity of state bonds in partnership with the exchange Nasdaq OMX Armenia, allowing to expand the access of individuals to the market of government debt obligations. And also increase interest in it from serious, including foreign, investors.

Arshaluys Margaryan, Head of the Department for Management of External and Internal State Debt of the Ministry of Finance of the Republic of Armenia, said at a press conference on April 14 in accordance with the resolutions approved on April 13, 2017 on new changes in the order of issuance, implementation, circulation and repayment of state bonds, starting from April 25, an Internet system of transactions for government bonds for individuals will be launched, as well as the initial implementation of securities from the Central Bank's platform to the bond platform of the stock exchange. The mechanism of the so-called "exchange auction" will also work.  Margaryan noted that today the main holders (about 70%) of state bonds are banks, and the rest falls mainly on the share of insurance and investment companies. He noted that this situation, when the assets of the holders of security bonds are substantially shorter than their duration, is unacceptable. "I expect that the number of bidders through the exchange electronic platform will increase significantly, which, in the context of the expected rise in economic activity in the state, supporting capital inflows, will improve the structure and ultimately reduce debt service costs," Margaryan noted. According to the expert, the launch of the so-called exchange auction on the Armenian stock exchange, which includes the purchase of one debt instrument to replace the offer of another, from the point of view of debt management and consideration of the wishes of market participants, will be a convenient mechanism for investors.  "An agreement with the stock exchange to improve the product line has already been reached, and from April 25 we are promised to provide access to exchange auctions," he said.  About the changes in the conditions for the presentation of non-competitive applications for the placement of state bonds, Margaryan, responding to a question of ArmInfo correspondent, explained that they will be presented by the agents of the market the next day, and those who on the day of implementation acquired state bonds on competitive bids. Previously, competitive and non-competitive bids were presented on the day of placement, because of which non-competitive bids, reflected in the demand, did not affect pricing.  "Now it will correspond to the type of bonus. The agents, who on the day of placement has bought as many competitive bids, the next day can acquire the similar number of non-competitive," he stressed. The specialist said that in the conditions of increasing the number of market participants, the conditions for the work of state debt agents in the face of financial organizations have changed as well: they will no longer make an initial deposit to participate in auctions, mutual settlement will be based on the results of trades.  "As a result, the more bids are received for the purchase of bonds, the more effective will be the pricing of debt," he said.  He also said that Armenia's joining the global numbering system of state bonds a year ago, eased perception of Armenian papers in foreign markets. "After the receipt of international codes, quotes of our securities in foreign markets increased, interest in them increased, we expanded the gateway for the entry of non-residents into our market, but this implies the inflow of foreign debt into the country .There are disadvantages as well as advantages. the emergence of imbalances in the domestic market. The threat lies in the fact that it will be speculative money, since emission volumes are small and are not interested in serious investors. in the past year, we have already started to reduce the number of auctions, but at the same time increased the amount of the issue, and this process we intend to continue," he stressed.

Speaking about the trends in the debt market, the expert said that the yield of state bonds from 13.8% reduced to the current 9.5% in 2015. "It is planned to allocate 45 billion AMD to finance the deficit due to state bonds in 2017, and according to my expectations, the same figure will be the actual figure. The highest threshold of this indicator was recorded in 2016, when the actual figure exceeded 171 billion AMD against the planned 53.8 billion," Margarian shared his forecast with ArmInfo. When asked about the "change" of banks' interest due to the low effective demand for loans from the credit market to the market for state securities, he advised banks to carefully and deliberately implement loans in order not to face imbalance in the structure of assets.