Ukraine places local Eurobonds for USD 351 mln at 5.4% rate

Ukraine’s Finance Ministry reported on Aug. 15 it
raised USD 351.5 mln from the placement of two-year, USD-denominated local
bonds at an average yield of 5.40%. The ministry received 13 bids and satisfied
all of them. This was the last placement of local dollar-denominated bonds
scheduled for 3Q17.

At the previous dollar bond auction on July 25,
MinFin placed two-year bonds for USD 157.9 mln at a rate of 5.34%.

Alexander Paraschiy: Ukraine is
nearing a USD 500 mln payment of coupons on its international Eurobonds
(UKRAIN) due on Sept. 1, so it’s no surprise that the government increased the
amount of local bonds placed this time. Meanwhile, this placement will most
likely be the key contributor to swelling Ukraine’s gross international
reserves in August.

By the year end, Ukraine will have to repay USD 651
mln in local Eurobonds and about USD 605 mln to the IMF (all in November and
December), so most likely we will see another issuance of local Eurobonds in
4Q17.

MinFin placed the two-year bonds at 6 bps more than
at the July 25 placement. This could be explained by bigger amount of bonds
floated and by a 12-basis point increase in the yields of comparable
international Eurobonds from July. But traditionally, MinFin was able to place
local bonds at a cheaper rate compared to the international bond market: the
negative spread of local bonds at the August auction was 35 bps (vs. 29 bps in
July).