Azerbaijan to Auction AZN 200 Million of Three-Year Bonds on 3 November

Azerbaijan's Ministry of Finance will offer AZN 200 million of three-year government bonds at an auction on the Baku Stock Exchange on 3 November, at a 7.0 per cent coupon. The sale follows a two-year auction on 27 October that drew bids of AZN 185.8 million and placed AZN 49.9 million at a cut-off yield of 7.0 per cent.

According to the ministry's auction notice, the new issue carries ISIN AZ0201240105, issued on 29 October 2026, and comprises 2,000,000 bonds with a face value of AZN 100 each. The paper has a maturity of 1,080 days, pays coupons every six months on 3 May and 3 November from 2027, and matures on 3 November 2029.

Auction rules

The notice sets three conditions. Non-competitive orders may not exceed 20 per cent of the issue. If demand exceeds supply and the price suits the issuer, the ministry may increase the placement by up to 100 per cent, which would take the sale to as much as AZN 400 million. The ministry may also cancel the auction if total bids come in below 20 per cent of the amount offered.

A tight cut-off at the last sale

The previous auction set the reference point. On 27 October, the ministry reported that investors submitted orders with a total nominal value of AZN 185.8 million for 720-day bonds, ISIN AZ0201240097. The ministry set the weighted average price for competitive orders at 98.1774, a yield of 6.9923 per cent, and the cut-off price at 98.1634, or 7.0000 per cent, placing AZN 49.9 million. Bids were therefore about 3.7 times the amount placed. Those bonds mature on 27 October 2028.

The 7.0 per cent coupon on the new three-year paper matches the cut-off yield on the two-year bonds.

Monetary backdrop

The auction comes days after the Central Bank of Azerbaijan left policy unchanged. On 29 October, the central bank kept its refinancing rate at 6.5 per cent, with the floor of the interest rate corridor at 5 per cent and the ceiling at 7.5 per cent. A 7.0 per cent government yield therefore sits half a point above the policy rate and inside the corridor.

The central bank reported annual inflation of 5.5 per cent in September 2026, 0.2 percentage points lower than in August and within its 4 per cent plus or minus 2 target range. Its October baseline forecast puts annual inflation at 5.9 per cent at the end of both 2026 and 2027.

Liquidity is ample. The central bank said the banking sector's structural liquidity surplus, excluding required reserves, reached AZN 6.2 billion at the end of September, 2.2 times the level of December. The average daily AZIR interbank rate stood at 6.31 per cent in August, 5.93 per cent in September and 5.99 per cent so far in October. Seven-day deposit operations made up 66.4 per cent of the central bank's sterilisation portfolio at the end of September.

What it means for investors

For banks sitting on surplus manat, a three-year sovereign bond at 7.0 per cent pays about a point above recent interbank rates. At the 27 October sale, AZN 135.9 million of the AZN 185.8 million bid went unfilled at a 7.0 per cent cut-off. Azerbaijan's public debt stands at 17.3 per cent of GDP, and the central bank's decision to hold its rate and raise its current account forecast came with a forecast current account surplus of $8.5 billion for 2026.

The 3 November result will show whether three-year demand matches the two-year book, and whether the ministry uses its option to place more than AZN 200 million.