Ukraine MinFin raises UAH 5 bln from local bond auction, lowers rates for 4M bonds

Ukraine’s Finance Ministry raised UAH 2.1 bln and USD
112.4 mln (a total of UAH 5.0 bln in the equivalent) at its weekly bond auction
on May 21 after raising a total of UAH 4.0 bln (in the equivalent) at the auction last week. MinFin
placed five types of UAH-denominated bonds with maturity ranging from four
months to four years, and 6M, 12M and 18M USD-denominated bonds.

The government lowered the interest rate for 4M
UAH-denominated bonds, setting a cut-off rate of 17.89% vs. 18.50% last week.
MinFin satisfied eight out of 18 bids for UAH 476 mln at 17.89%. In addition,
16 bidders bought 6M bonds for UAH 293 mln with a weighted average interest
rate at 18.37%, and 15 bidders bought 1Y bonds for UAH 423 mln at unified rate
of 18.50%.

The auction’s highest UAH receipts – 562 mln – came
from the sale of bonds maturing in August 2023 to seven out of eight bidders at
16.00%. The rest of UAH auction receipts – UAH 350 mln – came from the sale of
18M bonds, which were sold to nine out of 13 bidders with a weighted average
interest rate of 17.95%.

MinFin satisfied all bids for USD-denominated bonds.
The lion’s share of USD receipts – USD 97.8 mln – came from the sale of 6M
bonds to 16 bidders at 6.70%. In addition, 11 bidders bought 1Y bonds for USD
8.1 mln at 7.25% and 26 bidders bought 2Y bonds for USD 6.5 mln with a weighted
average rate of 7.74%.

Evgeniya Akhtyrko: By lowering
the interest rate for UAH bonds with the shortest maturity, MinFin is trying
apparently to “normalize” the yield curve for UAH-denominated bonds, which has
been clearly inverted. Meanwhile, the interest of market participants in buying
UAH-denominated local bonds hasn’t been rising.

Market participants preferred 6M USD-denominated bonds
to 1Y and 2Y, despite their significantly lower interest rate. Apparently,
buyers now are more cautious about buying local Eurobonds to be redeemed after
the end of 2019 as there is no guarantee that the government will get the
refinancing for managing the foreign debt burden after 2019.