Ukraine raises UAH 7.5 bln from local bond placement on Jan. 30

Ukraine’s Finance Ministry sold at its Jan. 30 auction
UAH-denominated bonds for UAH 3.6 bln and USD-denominated bonds for USD 137
mln. The UAH bonds maturing in 3M, 6M and 9M were placed at a 16.50% rate (50
bps higher from last week’s tender), the one-year bond was placed at a 16.40%
rate (90 bps higher from the placement seven weeks ago), and the five-year bond
was placed at 15.80% (6 bps higher than six weeks ago).

The one-year USD bond was placed at a rate of 5.30%
and two-year USD at 5.40%, or in line with the rates at tenders held in late
2017.

Alexander Paraschiy: It’s
natural to see higher rates for the UAH bonds, given that Ukraine’s central
bank hiked its key rate by 150 bps last week. The placements look successful,
given that the rates of the bonds were increased much less than the key rate.
Now the UAH yield curve on the local market has become clearly inverted, which
is an expected development.

MinFin’s debut sale of foreign currency bonds this
year looks less successful – today MinFin is due to repay USD 431 mln in local
bonds, and it likely planned their refinancing with the Jan. 30 tender. With
the low amount of dollar debt raised this month, we see Ukraine’s gross
international reserves falling by about 2.0%-2.5% in January, with the decline
to be caused by the USD bond repayment and about USD 170 mln net sale of
foreign currency by the central bank.

For the next month, MinFin schedules no issue of
foreign currency bonds, while Ukraine will have to pay USD 460 mln to the IMF,
which will cut gross reserves further in February.