Short term yields dive sharply

After the dramatic decline in 10-year bond yields, the government auctioned new bonds maturity two and five years, which also saw a massive decline in yields since the last auctions were held on such issues.

During the auction for the 2-year bonds with a coupon of 3.75%, the Central Bank acting on behalf of the Ministry of Finance put on auction up to CYP 50 mln worth of bonds. The total value of the bids submitted was CYP 91 mln of which CYP 50 mln were accepted at the weighted average price of CYP 100,74 per CYP 100 nominal value representing an annual yield of 3.36%. This is sharply lower than the 4.03% yield agreed at the last auction held for 2-year maturity paper that was held on July 12, according to Financial Mirror data and is in tandem with a decline in yields on the more active 10-year note auctions.

During the auction for the 5-year note, with a coupon of 4.25% and for up to CYP 50 mln, the Central Bank received bids totaling CYP 171.36 mln of which CYP 50 mln were accepted at the weighted average price of CYP 102,62 per CYP 100 nominal value representing an annual yield of 3.67%.

The agreed yield is also sharply lower than the 4.84% yield agreed at the last auction for 5-year paper held on Jan 7 a year ago and is in tandem with the decline in yields.

During the auction for 10-year bonds held on December 29, 2005, the yield was 3.96%.

The Central Bank also held an auction for up to CYP 50 mln Treasury Bills 52 weeks maturity. The total value of the bids submitted was CYP 169.332.000 of which CYP 50 mln were accepted at the weighted average price of CYP 971,47 per CYP 1.000 nominal value representing an annual yield of 2.95%.