Demand exceeded supply at auctions of Central Bank of Azerbaijan since second quarter of 2020
BAKU, Azerbaijan, Jan. 5
By Zeyni Jafarov – Trend:
The easing of Azerbaijan's monetary policy in 2020 was accompanied by a decrease in interest rates on deposit operations and short-term bills of the Central Bank of Azerbaijan (CBA), as well as a decline in the yield of the state securities, Trend reports with reference to the CBA.
The interest rates in the interbank market, as well as interest on deposits and loans, were balanced with risk premiums and easing of monetary conditions.
In general, the average interest on new loans in the national currency has decreased by 5.5 percentage points since January 2018. The risks in the real sector aggravated by the impact of the coronavirus pandemic (COVID-19) have limited further interest rate decline.
The level of dollarization of deposits continued to decline in 2020. The share of foreign currency deposits and deposits included in monetary aggregates amounted to 54.9 percent in early 2020, while an increase up to 56.5 percent was observed by late March and a gradual decrease up to 50.2 percent by November.
The dollarization of deposits of individuals by the beginning of December 2020 amounted to 52.7 percent.
The CBA adequately used various market operations to effectively manage liquidity in the economy.
Depending on the liquidity of the banking system, the demand for sterilization instruments of the CBA varied by months.
So, the CBA held 62 deposit auctions and 46 auctions for the placement of notes during 2020.
The concentration of the sterilization portfolio was reduced to prevent emerging threats to the macroeconomic stability under the influence of the pandemic and to maintain equilibrium in the foreign exchange market.
There was an excess of demand over supply at auctions organized by the CBA starting from the second quarter of 2020 while the yield on these instruments was approaching the lower limit of the interest rate band.
Earlier, Chairman of the CBA Elman Rustamov stressed that the country's financial sector demonstrates bigger stability than it was predicted.