MinFin raises UAH 17 bln from local bonds, rates drop ~40 bps

Ukraine’s Finance Ministry raised UAH 17.2 bln at its
weekly bond auction on July 30 after raising UAH 7.0 bln at the auction
last week. This is a record high hryvnia receipts at weekly
auctions. MinFin offered five types of bonds with maturities ranging from three
to 66 months.

More than half of the auction receipts – UAH 10.9 bln
– came from the sale of 5.5-year bonds to 32 out of 36 bidders with a weighted
average interest rate of 15.45% (vs. 15.84% three weeks ago). MinFin also
satisfied 32 out of 45 bids for 3Y bonds for UAH 5.4 bln with a weighted
average interest rate of 16.42%. In addition, 22 out of 39 bidders were
successful in buying 1Y bonds for UAH 0.5 bln with a weighted average interest
rate of 16.51% (vs. 16.99% last week).

The government satisfied all 11 bids for 6M bonds for
UAH 401 mln and all six bids for 3M bonds for UAH 19.5 mln. The weighted
average interest rate for 6M bonds dropped to 16.41% (vs. 16.68% last week),
while the rate for 3M bonds lowered to 16.23% (vs. 16.63% last week).

Evgeniya Akhtyrko: We were
right in our assumption that MinFin will go further
in lowering interest rates given the high demand for Ukrainian local debt. The
results of the latest auction imply that the MinFin is not likely to stop
experimenting with lowering rates. The recent appreciation of the national
currency to its three-year high  only increases the attractiveness of
UAH-denominated debts for non-residents.

However, a further decline in interest rates will
increase the disproportion between the cost of local debt and the central
bank’s interest rate, which is currently at 17.0%.