Finance Ministry attracts UAH 55.4 mln at local bond auction

Ukraine’s Finance Ministry sold UAH 55.4 mln in local bonds at a primary auction yesterday. The government offered three series with 3M, 9M and 2Y maturities. Market demand totaled just UAH 77 mln for 2Y papers with yields of 9.0 -13.5%. The Finance Ministry accepted the lowest 9% yield. Svetlana Rekrut:  Yesterday’s auction results are in line with our expectations and reflect low market interest in government debt given the high UAH deficit seen in the last couple of weeks. On the top of that, the Finance Ministry is continuing to refuse to increase bonds yields to secondary market levels (spreads 300-400 bps). In September, it is scheduled to repay UAH 5.9 bln in maturing bonds. Then, in our view, the Finance Ministry could begrudgingly increase yields, try to rollover the debt or keep the borrowing costs low but rely on state-owned banks and the NBU.