MinFin raises UAH 7 bln from local bonds, interest rates drop 30-70 bps

Ukraine’s Finance Ministry raised UAH 7.0 bln at its
weekly bond auction on July 23 after raising a record-high UAH 33.3 bln (in the
equivalent) at the auction last week. MinFin placed four types of
UAH-denominated bonds with maturities ranging from three months to three years.

More than three quarters of auction receipts – UAH 5.6
bln – came from the sale of 3Y bonds to 46 out of 49 bidders with a weighted
average interest rate of 16.44% (vs. 16.75% two weeks ago). In addition, 26 out
of 54 bidders were successful in buying 1Y bonds for UAH 491.2 mln at 16.99%
(vs. 17.68% a week ago). MinFin satisfied ten out of 25 bids for 6M bonds for
UAH 460.2 with a weighted average interest rate of 16.68% (vs. 17.21% a week
ago). The rest of auction receipts – UAH 354.2 mln – came from the sale of 3M
bonds to 13 out of 15 bidders with a weighted average interest rate of 16.63%
(vs. 16.96% a week ago).

Evgeniya Akhtyrko: The
National Bank’s reduction of the key policy rate last week
fostered a further decline in interest rates on the local bond market.
Meanwhile, the demand for UAH-denominated bonds remains high, as current
interest rates look very attractive amid annual consumer inflation of 9%
and the stable exchange rate.

It looks like the market will allow MinFin to go
even further with lowering interest rates on local debt. Overall, the market
continues to hint that the current key policy rate is too high for the current
economic conditions.