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Bonds sold with negative yields

SLOVAKIA sold its bonds also with a negative yield in the March 16 auction. Analysts say this is a result of the measures adopted by the European Central Bank (ECB).

(Source: Sme)

The Debt and Liquidity Management Agency (ARDAL) accepted the minimum interest rate of -0.0178 percent per annum for the state bonds maturing in January 2017. In average, it sold these bonds with a minimum interest rate of 0.0154 percent p. a., when the maximum accepted interest rate amounted to 0.0291 percent p. a., the SITA newswire reported.

In this auction, the state sold bonds worth €126 million, of which €49 million came from foreign investors. The total demand was €217 million, with €114 million offered by foreign investors. The investors originally claimed yields in the auction of 0.045 percent p. a. in average, SITA wrote.

In the second auction, in which ARDAL offered the bonds maturing in January 2029, it sold them for €115.7 million. The total demand was €339.7 million, of which €233.7 million came from abroad. The average required interest rate amounted to 0.8179 percent p. a., with the average accepted interest rate reaching 0.773 percent p. a., as reported by SITA.

“Slovakia currently borrows money for record-low interest rates, which happens also thanks to the lose monetary policy of the ECB which keeps the main interest rates at low levels, and which as of March 9, buys state bonds with the aim to support economic growth and increase the low inflation,” said Katarína Muchová, analyst with Slovenská Sporiteľňa, as quoted by the TASR newswire.

Analyst with X-Trade Brokers Kamil Boros agrees that low yields are results of the ECB steps.

“The quantitative easing plays a big role here, but it is necessary to mention also other measures from the anti-deflation package of the ECB, like minimum interest rates, the negative deposit interest rate, with which the reserves of banks in the central bank are remunerated, or long-term low interest loans to the banks,” Boros said, as quoted by TASR.

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