ArmInfo.Today, the Armenian Stock Exchange AMX conducted the first-ever government bond switch auction.
According to the AMX press service, government bonds with the ISIN AMGN36294277 were successfully placed with a total volume of 5 billion AMD. These bonds were exchanged for government bonds with the ISIN AMGN36294251, with a total buyback volume of 4.8 billion AMD. As noted in the announcement, the implementation of switch auctions is expected to enhance the liquidity of government bonds and reduce refinancing risks. Additionally, it will facilitate the gradual removal of older or illiquid bonds from the market, replacing them with newly issued ones.
Meanwhile, we note that this mechanism is quite active in international exchange markets, especially in the context of decreasing interest rates, which is gradually happening in Armenia. In such cases, the state as the issuer, has the opportunity to refinance by issuing new bonds with a lower coupon rate. The proceeds from these new bonds can then be used to repurchase old bonds. This allows the issuer to benefit from a lower interest rate, resulting in lower interest payments. This mechanism is also used when there are changes in demand for securities with varying maturities. Currently, the primary demand for government bonds in Armenia is focused on long-term segment, rather than the medium-term segment. In response to market situation, the state conducts bond refinancing transactions, replacing short-term securities with long-term ones.
