Georgian Central Bank
07 June, 2012

Employs Government Bonds for Open Market Operations

National Bank of Georgia (NBG) decided to use Government Bonds held by the NBG since 90s for open market operations starting May 30, 2012.

Monetary Policy of Georgian central bank came to the decision on May 25, 2012 to use Governmental Bonds it has in its portfolio for open market operations along with the already operational open market tools including certificates of deposit and short-term Treasury Bills (T-Bills) and Treasury Bonds (T-Bonds).
The

NBG plans to sell GEL 114 million worth Government Bonds from 1 to 5 year maturity in this June-July. Auctions started on Wednesday past week and are scheduled to take place each Wednesday in the targeted period.  
The new tool is to reduce interest rates fluctuation and increase efficiency of monetary policy, also to sterilize excessive liquidity at the money market, the NBG informs.
GEL 14 million worth bonds with 563 and 472 maturity period have already been sold at around 6.9% interest rate as average yield. 
The questioned obligations were issued by the NBG in exchange of the GEL 832.9 million Georgian government took in 90s from the NBG.
In March of 2006 the Government of Georgia and the NBG signed an agreement on measures to cover Government debt owed to the NBG that envisaged re-arrangement of the debt into the bonds with 16 to 60 months duration. According to the agreement, the GEL 48 million worth securities can be issued in circulation through re-arranging the debt into the bonds (with 16-60 months duration) every year. And the NBG can use them for open market operations that it did not refer until this time.  The debt will be fully covered by 2030.
Ditrikh Muller, a financial market analyst with Georgian investment Group, approves the initiative for the more tools are applied for open market operation the better.
“It is a fact that there is excessive money at the market that should be levied,” he said. Besides once the debt will be re-arranged in bonds and sold at auction it will alleviate the state debt burden for government will not have to pay off the debt from the state budget thanks to this deal.

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