2013-04-10
The new index will reveal how the financial condition of Lithuania is evaluated
The Bank of Lithuania began to announce a new government securities index, denominated in litas, which will reveal Lithuania’s borrowing price and risk assessment changes in the domestic market. The announcement of the government securities index becomes relevant when the state begins to finance an increasingly larger part of their shares by borrowing in the domestic market. In 2012 alone the volume of government borrowing in the domestic market increased by 1.5 times.
“The new indicator will complete the information gap that has existed till now, since such an index hasn’t been announced by any institution. The index and publicly-announced average distributed litas government securities index interest will show how subnational investors evaluate Lithuania’s credit risk. This will increase the transparency of the government securities market and provide additional information about the country’s financial health,” says Mindaugas Vaičiulis, Director of the Banking Service of the Bank of Lithuania.
The value of the new indicator was defined according to the prices established in the market; into the index were included the Republic of Lithuania’s government securities in litas, released in the domestic market via public broadcasting. The value of the index was calculated from 1 January 2006, equating the initial value to 1,000.
According to this rule, the calculated index data show that the financial situation of Lithuania was evaluated as being especially risky at the end of December 2008, when average government security profitability had hiked 11.60 per cent. On 9 April 2013, average profitability amounted to 1.67 per cent.
“The government securities index can become a sort of standard, assisting in the comparison and evaluation of investment fund management results. This can be relevant for customers of conservative funds. For example, conservative investment pension funds operating in Lithuania have directed a large share of their investments towards Lithuania’s government securities,” says M. Vaičiulis.
The value of the index and other index data are available on the Bank of Lithuania website.