Tuesday, April 25 2017 13:25
Alina Hovhannisyan

Primary placement of Armenian government bonds is transferred from Central Bank`s exchange to stock exchange and issue volumes will henceforth be large

Primary placement of Armenian government bonds  is transferred from Central Bank`s exchange to stock exchange and issue volumes will henceforth be large

ArmInfo. The Ministry of Finance of Armenia, according to the recently introduced amendments to the procedure for issuing, placing, circulating and redeeming state bonds, has transferred the primary placement of government bonds from the Central Bank's exchange to the Nasdaq OMX Armenia exchange. At the same time, the volume of emissions will be enlarged. The start of the initial placement on the exchange site will start from three issues - two medium- term (MTSB) and one long-term (LTSB). Henceforth, state bonds will be issued under the international registration code ISIN.

As the press service of the exchange told ArmInfo, May 2 will host the initial placement of 20-year LTSB-AMGB2029A374 and two MDSB-AMGN36294202 (three-year) and AMGN60294227 (five- year), each of which is set at 200 billion AMD. The annual yield on the coupon of long-term bonds is set at 12.5%, the three-year and five-year medium-term bonds - 8% and 9%, respectively. For these issues, the first coupon payment will be held on October 29 of this year.

According to the Armenian Ministry of Finance, in accordance with the approved April 13 2017 new changes in the order of issuance, placement, circulation and redemption of state bonds, starting from April 25, an Internet system of transactions for state bonds for individuals will be launched, the initial placement of securities is transferred 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, implying the repurchase of one debt instrument in place of the other's offer, which from the point of view of managing debt and taking into account the wishes of market participants will be a convenient mechanism for investors. According to the amendments, the terms of presentation of non-competitive applications for the placement of state bonds are also revised - they will be further submitted by the agents of the market on the next day, and by those who on the day of placement acquired state bonds on competitive bids. In the conditions of increasing the number of market participants, the conditions for the work of government debt agents in the face of financial organizations have been changed: they will no longer make an initial deposit to participate in auctions, mutual settlement will be based on the results of trades. The accession of Armenia to the world system of state bonds numbering a year ago facilitated the perception of Armenian securities on foreign markets. After receiving international codes, quotes of Armenian securities in foreign markets increased, interest to them increased, thus the gates were opened for the entry of non-residents into the Armenian market.

To noted, the Ministry of Finance, as an agent of the government, issues short-term, mid- term and long-term state bonds.  According to the results of 2016, there were in circulation 508.3 billion AMD of state bonds, of which long-term (LTSB) - 214.7 billion (42.2% on the market), medium-term (MDTS) - 212.7 billion (41.8%), short-term (STSB) - 78.8 billion (15.5%), and savings - 2.1 million AMD (0.4%). The average yield of state bonds following the results of 2016 was formed at the level of 13.1542%, with LTSB - 15.0118%, MTSB - 13.2241%, STSB - 7.8912%. The average maturity of the domestic public debt rose by the end of 2016 to 2,208 days from 2,065 days a year earlier, jumping to 2,440 days by April 2017. Due to state bonds it was planned to finance the deficit in 2005 by 53.8 billion AMD, but the actual figure for the year was 3.2 times higher - 171.01 billion AMD, while a year earlier, in 2015 the actual figure exceeded the planned figure more significantly - in 5 times - 15.6 billion against 3 billion AMD. The volume of circulating government bonds increased by 58.4% in 2016, in particular short-term almost 4 times, mid-term by 38.2%, long-term by 48.7%. With the average yield on state bonds decreased from 13.9917%, mainly due to a significant decline in the yield of short-term - from 12.2579%, with a slight decline in long-term and mid- term profitability - from 15.0142% and 13.2810% respectively. By April 1, 2017, the volume of circulating state bonds reached 511.1 billion AMD, of which LTSB - 237.7 billion (46.5% on the market), MTSB - 226.2 billion (44.3%), STSB - 44.9 billion (8.8%) , and the average yield of state bonds was formed at the level of 13.4137%, with LTSB - 14.8428%, MDSB - 13.0548%, STSB - 7.6529%.

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