On diversification of maturity of the Central Bank’s sterilization tools

20-09-2019

20 September 2019, Baku: The Central Bank keeps on developing the capacity of tools to ensure higher effectiveness of monetary policy operations. The Bank is planning gradual issue of 84-, 168- and 252-day notes in order to establish conditions for interest rate formation in the part that covers short-term period of the yield curve by diversifying maturity of sterilization tools, supporting development of the securities market as a whole and rejuvenating the interbank money market on this basis.

New maturity notes will be issued skipping the ‘interest rate’ principle; i.e. orders at auctions to be held with respect to new maturity notes will not be limited to the floor of the interest rate corridor and the refinancing rate, and interest rates will reflect auction participants’ market rate expectations.

One of the novelties related to auctions on placement of notes is changes to the settlement regime. Hence, to make settlements on note transactions more convenient the Central Bank’s settlements on all maturity notes will be maintained in T+1 regime from 28-day note auction held on 18 September onward.

To note, the Baku Stock Exchange held first 84-day note auction today. Demand was AZN147.59M against AZN30M worth of supply. Return on orders ranged between 6,0%-9,5%. Yield on cut-off price was 6,04%, while average weighted yield was 6,03%.