What effect does refinancing rate increase have on the demand for government bonds?

10:05 Sat, 17 April

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07.Apr .2021 13:00

What effect does refinancing rate increase have on the demand for government bonds?

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The government took the domestic debt of 35 million GEL on April 6, while the banks wanted to buy 91 million GEL worth of securities.

The Government of Georgia takes domestic debt from the local economy by issuing treasury bonds. The financial resource is purchased by commercial banks from the state. Along with the increase of the refinancing rate by the NBG, the domestic debt of the state has become more expensive.

Aleksandre Dzneladze, President of the Banking Association, explained to BMG that the NBG's decision to increase refinancing by 50 basis points to 8.5% in March resulted the increase of banks' interest towards the government bonds.

"Refinancing rate growth is increasing the interest rate on securities, which grows the demand on them. In general, there has never been a low demand for these securities, but I think it will increase further," said the president of the Banking Association.

Government of Georgia Domestic Debt

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What effect does refinancing rate increase have on the demand for government bonds?

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