Ukraine raises UAH 10.9 bln from local bonds, slashes interest rates

Ukraine’s Finance Ministry raised USD 0.3 bln and UAH
3.4 bln (UAH 10.9 bln in the equivalent) at its weekly bond auction on Nov. 12
after drawing UAH 3.1 bln at the auction last week.
The auction receipts came from the placement of 2Y USD-denominated bonds, as
well as 3Y, 1Y and 6M UAH-denominated bonds.

The weighted average interest rate for 2Y
USD-denominated bonds dropped to 4.02% from 5.5% two months ago, while the
cut-off interest rate amounted to 4.25%. MinFin satisfied 76 out of 102 bids
for USD-denominated bonds for USD 304.9 mln.

The largest UAH auction receipts came from the sale of
3Y bonds to 23 out of 54 bidders for UAH 2.6 bln with a weighted average
interest rate of 13.07% (vs. 15.42% for the same bonds a month ago). MinFin
also attracted UAH 524 mln from the sale of 1Y bonds to six out of seven
bidders with a weighted average interest rate of 13.74% (vs. 14.00% for the same
bonds a week ago).

On top of that, three out of five bidders were
successful in buying 6M bonds for UAH 264 mln with a weighted average interest
rate of 14.10% (vs. 15.40% for 6M bonds three weeks ago).

Evgeniya Akhtyrko: 
Interest rates at the local bond primary market continue to plummet, while the
demand of market participants is high enough to cover the Ukrainian
government’s needs in financing the budget deficit.

The return of local Eurobonds to the market after a
two-month recess also found satisfactory demand despite plummeting interest
rates. The USD auction receipts will partially compensate November’s drop in
international reserves related to the redemption and servicing of local
Eurobonds for EUR 425 mln.

Next week, MinFin plans to offer 3M, 1Y and 2Y
UAH-denominated local bonds. We are likely to see a drop in UAH auction
receipts as market participants don’t have much demand for bonds with terms of
maturity less than three years.