Local bond receipts drop to UAH 1 bln as interest rates stand still

The Finance Ministry’s weekly local bond placement
held on Feb. 27 raised UAH 990 mln after UAH 1.2 bln attracted last week. The
government placed 3M, 6M, 9M, and 5Y bonds, accepting 14 out of 22 bids. The
interest rate for 3M bonds, accounting for more than half of auction receipts,
has not changed for the last three weekly auctions, staying at 16.00%. The rate
for 6M bonds inched up to 16.40% from 16.37% one week ago. 9M bonds were placed
at 16.50%, unchanged from the previous placement two weeks ago. Four auction
participants bought 5Y bonds for UAH 287.8 mln at an interest rate of 15.79%,
while last month’s placement brought UAH 741.3 mln at an interest rate of
15.80%.

Evgeniya Akhtyrko: Demand for
local bonds continues to drop ahead of a possible hike in key policy rate by
the National Bank of Ukraine (NBU) on March 1. It is very likely that the NBU
will hike the rate by 0.5-1.0pp (from 16.0% currently) amid high inflation and
uncertainty surrounding the next loan tranche under the IMF EFF
program.

A possible hike in the NBU’s key policy rate will
push the interest rates of local bonds higher as the yields on MinFin bonds
should stay competitive with the interest rate of the NBU’s deposit
certificates, which is tied to the key policy rate.