Finance Ministry attracts UAH 747 mln in UAH debt, rates falling
20 January 2011
On Tuesday the Finance Ministry held a scheduled UAH debt auction and attracted UAH 747.1 mln (USD 94 mln) in 3M-5.4Y papers, bringing its total amount raised since the start of the year to UAH 915 mln. Total bid volume was UAH 2.7 bln. Only bids with the lowest YTMs were satisfied for all four series; while strong demand drove yields somewhat lower: 6M bonds were placed at 6.75% (bids ranged 6.75%-8.75%), down from 7% a week ago (bids ranged 7%-10%). 2Y papers were placed at 10%, with bids coming in the 10%-13% YTM range, while 5Y papers with a put option in 1.5Y were sold at 9.5% YTM (bids ranged 9.5%-11%). Despite the delay in the privatization of Ukrtelecom (expected to be sold at ~UAH 10 bln), government’s cash position now looks strong: following its USD 500 mln, 1Y Eurobond issuance in December and smaller than expected cash fiscal gap in 2010 (~UAH 50 bln or ~5% of GDP, ~UAH 5 bln below our expectations). The government had around UAH 15-20 bln in spare cash on its accounts as of end-2010, which covers almost all its financing needs for 1Q11 or up to one half of government financing needs for 1H11.
Financing needs and sources of the government in 1H11*
Financing needs 1Q11 2Q11 Total (1H11)
Financing sources UAH Bonds UAH 9.6 bln UAH 5.7 bln UAH 15.3 bln
Spare cash on accounts as of end-2010
UAH 15-20 bln Eurobonds UAH 4.8 bln – UAH 4.8 bln
Privatization (Ukrtelecom)
UAH 10 bln Fiscal gap UAH 0-5 bln UAH 5-10 bln UAH 10-15 bln
UAH Bonds (auctions) / Eurobonds
UAH 5-10 bln
Total
UAH 14.4-19.4 bln
UAH 10.7-15.7 bln
UAH 30-35 bln
Total
UAH 30-35 bln
*Assuming prolongation of USD 2 bln VTB loan in June till, at least, December’11
We expect the government to continue tapping the primary UAH debt market in the coming months, only satisfying the best/“attractive” bids and keeping its financing costs from rising.
