Ukraine raises UAH 6 bln from local bonds, interest rates drop below 11%

Ukraine’s Finance Ministry raised UAH 6.0 bln at its weekly
bond auction on Jan. 14 after drawing the equivalent of UAH 5.3 bln at the previous auction
on Dec. 24. The auction receipts came from the placement of 3M, 15M, 2Y and 4Y
bonds.

More than half of auction receipts – UAH 3.2 bln –
came from the sale of 4Y bonds to 31 out of 66 bidders with a weighted average
interest rate of 9.88% (vs. 11.67% for the same bonds on Dec. 10). The sale of
2Y bonds to 18 out of 38 bidders brought UAH 1.7 bln with weighted average
interest of 10.04%.

In addition, MinFin satisfied 14 out of 40 bids for
the purchase of 15M bonds for UAH 570 mln with a weighted average interest rate
of 10.18%. On top of that, nine out of 23 bidders were successful in buying 3M
bonds for UAH 523 mln with a weighted average interest rate of 10.73%.

Evgeniya Akhtyrko: The high
demand for UAH-denominated local bonds, especially for long-term ones, implies
that non-resident investors are happily returning to the Ukrainian market after
the holiday recess. Interest rates have dropped significantly since the latest
auctions in December, but they still yield solid real returns amid cooling consumer inflation
and appreciating hryvnia.

We expect the activity of non-resident investors at
Ukraine’s primary bond actions will remain high, at least through the end of
January. The National Bank of Ukraine is likely to lower its key policy rate
significantly from current 13.5% on Jan. 30, and this should prompt a further
cut in interest rates.