Ukraine raises UAH 25 bln from local Eurobonds

Ukraine’s Finance Ministry raised USD 801.6 mln and
EUR 75.7 mln (UAH 24.8 bln in the equivalent) at its weekly bond auction on
Mar. 24 after raising USD 71.6 mln (UAH 1.9 bln in the equivalent) at
the auction last week. The auction receipts came from the
placement of 3M USD-denominated bonds and 14M EUR-denominated bonds.

MinFin satisfied eight out of ten bids for 3M
USD-denominated bonds with a weighted average interest rate of 3.0% (vs. 3.5%
for 10M USD-denominated bonds placed last week). Two bidders bought 14M
EUR-denominated bonds at 2.2%.

Evgeniya Akhtyrko: The record-high
auction receipts imply that the government’s needs in financing the budget
deficit are skyrocketing. The severe lockdown measures introduced at the end of
last week in its attempt to contain the coronavirus infection resulted in a
shutdown of many businesses. Meanwhile, those deemed to be providing essential
goods and services saw their activity decline. In all, that is certain to
shrink budget revenue collections.

The government made a significant effort in
boosting auction receipts this time. To accomplish that, the foreign currency
resources of state-owned companies and state-owned banks are likely being
mobilized for purchasing these bonds. Meanwhile, financing budget deficit
through the issue of local Eurobonds is a short-term fixing. The placement of
3M local Eurobonds for USD 800 mln looks especially worrisome, as the
government is not likely find additional resources neither for redeeming the
bonds nor for rolling them over in three months.