State guarantees for corporate bonds in Azerbaijan could reduce their annual yields, PASHA Capital Investment Company CEO Isi Mustafayev said.
Report informs that he was speaking at the 12th Investment and Sustainable Development in Microfinance Conference, organized by the Azerbaijan Microfinance Association (AMFA) in Baku.
According to Mustafayev, AzerMash Group recently successfully placed 10 million manats ($5.88 million) worth of interest-bearing, unsecured, registered book-entry bonds with support from the Mortgage and Credit Guarantee Fund.
"One of the key factors is who provides the guarantee. For example, while the average interest rate for securities without guarantees in the repo market is currently around 15%, introducing guarantee and insurance mechanisms could bring rates down to 12% or lower.
"In this case, investors would focus not only on high returns but also on reduced credit risk. Lower credit risk also affects the maturity of securities. While securities without guarantees can currently be readily placed with maturities of one or two years, introducing a guarantee mechanism would make it possible to readily place three- and five-year securities as well.
"I therefore believe that introducing an institutional guarantee system would both lower coupon yields and broaden the investor base. With such a system in place, institutional investors would also begin participating more actively in the securities market. In addition, securities would have longer maturities," Mustafayev added.