10-year bond yield break below 4%

The yield on the benchmark 10-year bonds finally broke below the 4% level during the last auction held in 2005 marking a record decline from the 6% level at the start of the year.

The decline in the yield is also seen as helping in efforts to meet and converge with minimum euro-entry criteria, before the official euro adoption day of January 2008.

During the 10-year bond auction with a coupon of 4.5% held on December 29, the Central Bank, acting on behalf of the government received a total of CYP 248.45 mln worth of bids for CYP 100 mln paper on offer, of which only CYP 60.05 mln were accepted.

The agreed price for the 10-year bond, which is seen as the benchmark for interest rate expectations was set at 104.46 per CYP 100 nominal value representing an annual yield of 3.96% compared to 4.08% yield agreed at the November 30 and 4.22% September 28 auctions. Bond prices move in opposite direction to yields.

Yields also fell sharply during the 13-week Treasury Bill auction held on the same day. During the auction for CYP 50 mln 13-week T-bills, the Central Bank acting on behalf of the government received a total of CYP 216 mln bids, of which CYP 50 mln were accepted at the weighted average price of CYP 993,39 per CYP 1.000 nominal value representing an annual yield of 2,67%, down sharply from 3.95% agreed at the June 7 and 4.54% at the April 18 auctions.