Secondary Treasury Bill Market to be Developed

YEREVAN (Reuters) – Armenia intends to develop a secondary treasury bill market in 1999–which should help drive down high annual yields on government paper–the chairman of the central bank–Tigran Sargsyan–said on Tuesday.

"The development of a secondary market is of the utmost importance. This is a priority area," he told Reuters.

He said the goal was to attract as much domestic capital to the market as possible–which he said should reduce annual yields from current levels of around 65 percent on three-–six-–nine- and 12-month notes.

Sargsyan blamed the high rates on Russia’s economic crisis–as he said many of the big players in the Russian treasury bill market had also been involved in the Armenian market.

He said those players–having lost large sums in Russia–had to pull their cash out of other merging markets such as Armenia in order to concentrate liquidity.

Without the Russian crisis–he said annual yields would be around 30 to 35 percent.

Foreign participation in Armenia’s treasury bill market has slipped from around 60 percent to just six percent in the wake of the crisis–he said.

But Sargsyan called this a positive sign–saying that too much non-resident participation was not desirable.

"I am happy about the low non-resident participation. The point is to marshall as many internal resources as possible. Money from abroad comes and goes too quickly and creates an unstable situation," he said.

He said domestic capital was more reliable as there was no danger of it fleeing the country on a whim.

There was no chance of a collapse of the Armenian treasury bill market–as happened in Russia–because of the small size of the market–with just $40 million in outstanding notes.

"I absolutely exclude (a collapse). We can’t be compared to Russia. First of all the levels are small. We have the means to cover them and if we needed to we could just abandon the treasury bill idea altogether," he said.


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