SARAJEVO, Oct 18 (Reuters) - The yield on nine-month treasury bills issued by Bosnia's autonomous Bosniak-Croat Federation turned negative on Tuesday as banks snapped up the paper as a cheaper alternative to keeping money at the central bank.
The region hit its target of 30 million Bosnian marka ($19.9 million) to help plug a budget gap, with the average yield falling to -0.0167 percent from 0.26 percent at the previous sale of the nine-month paper last December.
Investors, mostly banks, placed bids of 103.5 million marka, data from the regional Finance Ministry showed.
Bosnia's central bank introduced a fee in April for banks' surplus reserves equal to the European Central Bank's 50 percent interest rate on commercial bank deposits, which is aimed at boosting lending.
The move has prompted banks to instead purchase government debt as it is less costly than keeping their surplus reserves with the central bank, a Finance Ministry official told Reuters.
Bosnia's two autonomous regions, the Federation and the Serb Republic, have a combined budget deficit of about 1 billion marka and need cash to help cover their financing needs.
The International Monetary Fund (IMF) last month approved a three-year extended loan arrangement for Bosnia worth 553.3 million euros ($607.47 million) to support the country's economic reform agenda. ($1 = 1.77 Bosnian marka) ($1 = 0.9108 euros) (Reporting by Maja Zuvela; Editing by Daria Sito-Sucic and Alison Williams)