10-year bond yield falls to 4.08%

A massive over-subscription during the 10-year bond and 52 week T-Bill auction caused a plunge in bond yields, which hit a new record low amid signs of further interest rate cuts in the near future.

During the 10-year bond auction held on November 30, the Central Bank, acting on behalf of the government received a total of CYP 125.08 mln worth of bids for CYP 30 mln paper on offer, of which only CYP 15 mln were accepted.

While most analysts were bracing for a massive over-subscription, since this was the first time since the end of September that the government was tapping funds from the market, the massive decline in yields grabbed most of the attention.

The agreed price for the 10-year bond, which is seen as the benchmark for interest rate expectations fell sharply to 105.42 per CYP 100 nominal value representing an annual yield of 4.08% compared to 4.22% yield agreed at the September 28 auction. Bond prices move in opposite direction to yields.

The same picture was also evident during the auction for up to CYP 30 mln Treasury Bills with date of issue 1.12.2005 and 52 weeks’ maturity.

The total value of the bids submitted was CYP 124,360,000 of which CYP 15,000,000 were accepted at the average price of CYP 969.82 per CYP 1,000 nominal value representing an annual yield of 3.12%, down sharply from 3.51% agreed at the September 28 auction.