Keeping low discount rate in Azerbaijan to positively impact capital market - Unicapital

Finance Materials 10 March 2021 13:17 (UTC +04:00)
Keeping low discount rate in Azerbaijan to positively impact capital market - Unicapital

BAKU, Azerbaijan, Mar.10

By Zeyni Jafarov – Trend:

A big demand reaching 111.8 million manat ($65.76 million) was observed on the Baku Stock Exchange-held auction on the placement of medium-term bonds of the Azerbaijani Ministry of Finance amounting to 30 million manat ($11 million) on March 2, which, 2021, Head of Research and Investment Consulting Department of Unicapital OJSC Seymur Ibadov told Trend.

According to Ibadov, during the auction, 15 investors filed 25 bids with a yield to maturity (YTM) ranging from 8.29 to 10 percent. As a result, 45 million manat ($26.47 million) with the YTM of 8.43 percent was placed.

He said that in the upcoming week the ministry plans to place the next bonds, the volume of orders for which will be 50 million manat ($29.4 million). The volume of bonds offered by the issuer can be increased up to 50 percent if during the auction state bonds exceed the supply of demand and the issuer is pleased with the price.

The company’s representative stressed that the Central Bank of Azerbaijan (CBA), which is the regulator of the capital market, predicts inflationary expectations amid expectations of an increase in aggregate demand, supported by fiscal policy at the level of four percent by the end of 2021.

He also noted that the continuation of the soft monetary policy of the CBA leads to the fact that the discount rate will remain low for some time, and its maintenance will further reduce inflation, which will directly have a positive effect on the local capital market.

"The 4-percent inflation rate is the target range of the Central Bank and, therefore, a sharp decline in the discount rate throughout 2021 seems unlikely," concluded Ibadov.

At the last meeting, the CBA’s Chairman Elman Rustamov forecasted that inflation in the country during 2021 will be at the level of four percent. He based such forecast on a recovery in consumption demand and fiscal stimulus measures in Azerbaijan.


Follow the author on Twitter: @jafarov_zeyni