Ukraine MinFin attracts UAH 18 bln on local bond placements

Ukraine’s Finance Ministry reported it sold local bonds for a total amount of UAH 18.2 bln (USD 700 mln) at its April 5 auctions. This amounts to 18.5% of Ukraine’s total annual plan to attract UAH 98.4 bln in local debt.

In particular, MinFin was able to sell USD 651 mln in local two-year Eurobonds at a yield of 7.85%. It also sold UAH 1.3 bln in three local bonds maturing in three, five and 21 months, at respective yields of 16.2%, 17.9% and 19.7%.

Alexander Paraschiy: The successful placement of dollar-denominated bonds locally suggests that the Ukrainian banking system has some excess dollar liquidity. Interestingly, Ukraine’s nearest international dollar-denominated Eurobond (due in 2.5 years) yields today at 9.70%, which is over 185  bps spread to yesterday’s deal on local market. With the recent placement of local Eurobonds, Ukraine has already attracted locally USD 1.6 bln in debt YTD, which is equal to the amount of the scheduled repayment of local dollar bonds in 2016.

The demand for the hryvnia-denominated, three-month bond at a yield of 16.2% looks surprising, given that banks have currently an ability to buy two-week, central-bank deposit certificates at an interest rate of 20%. In our view, such a phenomenon suggests expectations of a decrease in interest rates in the local currency very soon.