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Azerbaijani State Oil Fund: Demand for state bonds rises sharply during period of economic uncertainty

Economy Materials 15 March 2020 13:08 (UTC +04:00)
Azerbaijani State Oil Fund: Demand for state bonds rises sharply during period of economic uncertainty

BAKU, Azerbaijan, March 15

By Nargiz Ismayilova – Trend:

Besides the accumulation of resources for future generations, the main tasks of the State Oil Fund of Azerbaijan (SOFAZ) are the macroeconomic stabilization, as well as protection of the country's economy from external economic shocks, SOFAZ told Trend.

“The main part of SOFAZ’s expenses is its obligations on transfers to the state budget,” SOFAZ said. “To fulfill these obligations, SOFAZ will convert foreign currency into manat through auctions organized by the Central Bank. This means that SOFAZ regularly carries out large-scale dollar interventions in the foreign exchange market.”

“Of course, when forming SOFAZ’s investment strategy, such important tasks as accumulation for future generations and ensuring insurance for the country's economy against external threats are taken into account in a balanced manner,” SOFAZ said.

“However, despite the economic uncertainty directly affects the financial markets, the situation is different in various investment assets,” SOFAZ said. “Thus, persistent negative expectations regarding the future of the global economy immediately have a negative impact on the stocks which are traded on the stock exchange.”

At the same time, during the period of economic uncertainty, the demand for certain types of assets, including bonds, especially state bonds, increases greatly, which positively affects their prices.

Presently, stocks demonstrating high return during the long period and which are characterized by high price volatility in SOFAZ’s investment portfolio make up about 10 percent.

The weight of bonds in SOFAZ’s funds is about 70 percent. SOFAZ has also greatly increased its share of high-rated state bonds recently as part of its total bond asset for taking preventive measures.

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